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93–228 2004

PRESIDENT’S FISCAL YEAR 2005 BUDGET FOR THE 

U.S. DEPARTMENT OF HEALTH AND HUMAN 

SERVICES 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED EIGHTH CONGRESS 

SECOND SESSION 

FEBRUARY 10, 2004 

Serial No. 108–32 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

BILL THOMAS, California, Chairman 

PHILIP M. CRANE, Illinois 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

AMO HOUGHTON, New York 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

JENNIFER DUNN, Washington 

MAC COLLINS, Georgia 

ROB PORTMAN, Ohio 

PHIL ENGLISH, Pennsylvania 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

SCOTT MCINNIS, Colorado 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

ROBERT T. MATSUI, California 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MAX SANDLIN, Texas 

STEPHANIE TUBBS JONES, Ohio 

Allison H. Giles, Chief of Staff 

Janice Mays, Minority Chief Counsel 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

iii 

C O N T E N T S 

Page 

Advisory of February 2, 2004, announcing the hearing ....................................... 2 

WITNESS 

U.S. Department of Health and Human Services, Hon. Tommy G. Thompson, 

Secretary ............................................................................................................... 11 

SUBMISSIONS FOR THE RECORD 

National Association of Chain Drug Stores, Alexandria, VA, statement ............ 68 

Sandata Technologies, Inc., Port Washington, NY, Stephen A. Silverstein, 

and Mark C. Baff, statement .............................................................................. 72 

(1) 

PRESIDENT’S FISCAL YEAR 2005 BUDGET FOR 

THE U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

TUESDAY, FEBRUARY 10, 2004 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, DC. 

The Committee met, pursuant to notice, at 2:10 p.m., in room 

1100, Longworth House Office Building, Hon. Bill Thomas (Chairman of the Committee) presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 02, 2004 

FC–13 

Thomas Announces Hearing on 

President’s Fiscal Year 2005 Budget for the 

U.S. Department of Health and Human Services 

Congressman Bill Thomas (R–CA), Chairman of the Committee on Ways and 

Means, today announced that the Committee will hold a hearing on the President’s 

Fiscal Year 2005 Budget for the U.S. Department of Health and Human Services 

(HHS). The hearing will take place on Tuesday, February 10, 2004, in the 

main Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 p.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from the Honorable Tommy G. Thompson, Secretary, U.S. Department of Health and Human Services. However, any individual or organization not 

scheduled for an oral appearance may submit a written statement for consideration 

by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

On January 20, 2004, President George W. Bush delivered his State of the Union 

address, in which he discussed several legislative initiatives. The President provided 

the details of these proposals on February 2, 2004, in his fiscal year 2005 budget 

as submitted to the Congress. The budget for HHS included initiatives aimed at: 

strengthening and improving Medicare; assisting individuals who lack health insurance; and reauthorizing and improving Temporary Assistance for Needy Families, 

and related programs. 

In announcing the hearing, Chairman Thomas stated, ‘‘This hearing will help lay 

the groundwork for the year’s legislative business. The Committee will examine the 

Administration’s plans to implement the landmark Medicare law that provides prescription drug coverage to seniors. We will also examine the President’s proposal 

aimed at reducing the number of uninsured Americans,’’ Thomas said. 

‘‘In addition, we will continue to work to ensure that the welfare reform bill 

passed by the House last year becomes law. Despite the dire predictions of reform 

opponents, the 1996 welfare reform changes have led to higher earnings for low-income parents, historic declines in child poverty, and a sharp reduction in the welfare caseload. We must support and encourage even more welfare recipients to work 

and must resist efforts to turn back the clock to pre-reform policies discouraging 

work and promoting dependence.’’ 

FOCUS OF THE HEARING: 

The focus of the hearing is to review the President’s fiscal year 2005 budget proposals for the U.S. Department of Health and Human Services. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person or organization wishing to submit written comments 

for the record must send it electronically to hearingclerks.waysandmeans@ 

mail.house.gov, along with a fax copy to (202) 225–2610, by close of business Tuesday, February 24, 2004. In the immediate future, the Committee website will allow 

3 

for electronic submissions to be included in the printed record. Before submitting 

your comments, check to see if this function is available. Finally, due to the change 

in House mail policy, the U.S. Capitol Police will refuse sealed-packaged deliveries 

to all House Office Buildings. 

FORMATTING REQUIREMENTS: 

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee. 

1. All statements and any accompanying exhibits for printing must be submitted electronically 

to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to (202) 225–2610, in 

Word Perfect or MS Word format and MUST NOT exceed a total of 10 pages including attachments. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All statements must include a list of all clients, persons, or organizations on whose behalf 

the witness appears. A supplemental sheet must accompany each statement listing the name, 

company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman THOMAS. If we can ask our guests to find seats, 

please. 

Good afternoon. As we continue to explore the President’s fiscal 

year 2005 budget, I would like to welcome once again the Secretary 

for the U.S. Department of Health and Human Services (HHS), 

Tommy Thompson. We obviously look forward to his remarks on 

the Administration’s health care and welfare priorities. 

Last year we successfully accomplished a longstanding health 

care goal, providing prescription drugs to seniors under Medicare. 

Starting in June of this year, a prescription drug discount card will 

be available to seniors to help reduce their out-of-pocket costs. 

In just 3 months, over 100 companies have signaled to HHS their 

intent to offer discount cards to seniors, and I am sure we will be 

anxious to hear the process that the Secretary envisions for selecting those that would be able to provide this valuable service. 

Further, we already are seeing the positive effects of other Medicare improvements in the new law: the revised reimbursement 

rates for integrated Medicare Advantage plans that resulted in 

lower premiums, improved prescription drug coverage, and better 

health care choices for seniors. We believe 93 percent of seniors in 

these plans will see reduced premiums; about 80 percent, reduced 

co-payments and deductibles; and perhaps 60 percent will receive 

additional benefits, including prescription drugs. 

4 

These are projections, obviously, as anyone’s estimate of what is 

going to occur under this bill must necessarily be. However, it is 

pretty obvious that even with the passage of this landmark Medicare Prescription Drug and Modernization Act of 2003 (P.L. 108– 

173), there is more to be done on the health care front. Far too 

many Americans, we all know unfortunately, face health insurance 

as an unaffordable luxury. I am hopeful that Members of this Committee will continue to work together in a bipartisan way to assist 

us in the ability to provide all Americans health insurance. 

Mr. Secretary, we are keenly aware of your long and strong leadership in the area of welfare reform, not just as Secretary of HHS, 

but as Governor of Wisconsin for more than a decade, and no one 

disputes the success of the welfare reform. We clearly want to listen to you and the Administration’s thrust because the House approved a bill designed to move even more families off welfare into 

work and self-sufficiency. The difficulty, in part, is coordinating 

with the Senate and getting legislation that would reach the President’s desk. 

Prior to hearing from you, Secretary, I would ordinarily call on 

the gentleman from New York, but as Chairman, I would like to 

exercise the right—and obviously my colleague, Mr. Rangel will, 

and someone here on the dais wearing a similar red outfit will as 

well. Normally it would be of some concern with this many ladies 

in the audience all wearing the same red, but I think that is a 

badge not only of courage but honor today. 

We have with us Delta Sigma Theta. The gentleman from New 

York would also like to recognize you, and perhaps in his presentation he can allow the gentlewoman from Ohio to have a word 

rather than wait her normal turn. The gentleman from New York. 

[The opening statement of Chairman Thomas follows:] 

Opening Statement of the Honorable Bill Thomas, Chairman, and a 

Representative in Congress from the State of California 

Good afternoon. As we continue to explore the President’s Fiscal Year 2005 budget, I’d like to welcome Health and Human Services Secretary Tommy Thompson. I 

look forward to your remarks on the Administration’s health care and welfare reform priorities. 

Last year we successfully accomplished a long standing health care goal: Providing prescription drugs to seniors under Medicare. Starting in June of this year, 

a prescription drug discount card will be available to seniors to help reduce their 

out-of-pocket costs. In just three months, over 100 companies have signaled to HHS 

their intent to offer discount cards to seniors. Further, we’re already seeing the positive effects of other Medicare improvements in the new law. The revised reimbursement rates for integrated Medicare Advantage plans have resulted in lower premiums, improved prescription drug coverage and better health care choices for seniors. Ninety-three percent of seniors in these plans will see reduced premiums, 81 

percent will have reduced copayments and deductibles and 60 percent will receive 

additional benefits, including prescription drugs. In addition, plans are moving into 

new areas, providing additional choices for seniors. 

Even with the passage of the landmark Medicare law, there is still more to be 

done on the health care front. For too many Americans, health insurance is an 

unaffordable luxury, leaving them and their families vulnerable to exorbitant medical expenses. In his State of the Union address, the President outlined key initiatives aimed at making health insurance more accessible and affordable. We look forward to exploring these proposals with you in further detail. 

Mr. Secretary, we also are aware of your strong leadership in welfare reform, both 

as governor of Wisconsin and as Secretary of HHS. No one disputes the success of 

welfare reform. Today, nine million fewer parents and children are dependent on 

welfare than before we passed the 1996 reforms. Over two million children have 

5 

been removed from poverty. And three times as many welfare recipients are working now. 

Last February, the House approved a bill designed to move even more families 

off welfare and into work and self-sufficiency. That’s the only solution to poverty, 

and our bill would provide more funding for child care to support that goal. But instead of improvements, we’ve been forced to mark time with a steady series of shortterm extensions. The most recent extension expires at the end of March. It is my 

hope that the Senate will pass welfare reform legislation soon, so we can continue 

to improve the nation’s welfare program. 

And now, prior to hearing from you, Mr. Secretary, I would ask the gentleman 

from New York, Mr. Rangel, if he has any comments. 

f 

Mr. RANGEL. Thank you, Mr. Chairman. I think the Deltas represent what is good in America. They could just organize for social 

events, but rather than do that, they do good work not only in the 

community but working with the city, State, and Federal Government, and they have spent today visiting Members of Congress 

with long agendas, legislative agendas of things that they are concerned about. 

During this time of economic and national crisis, it would appear 

to me that people should not be just despondent with their government but should participate and should make certain that everyone 

is registered, everyone is voting, everyone is doing something. The 

Deltas just make me so proud, because it is hard to go into any 

community in these great United States that we don’t see evidence 

of their good work. I would just like to thank them for all that they 

do, and yield to the gentlelady from Ohio who exemplifies the best 

of Delta. 

Ms. TUBBS JONES. Thank you, Mr. Ranking Member, Charles 

Rangel. Mr. Chairman, Mr. Thomas, thank you for this opportunity. 

Today is Delta’s Day at the Nation’s Capitol. We have more than 

700 women in red here, talking to their legislators both on the 

House and Senate side. To all of my colleagues from across this 

country, if you have not had a chance to get to meet members of 

our sorority in your congressional district, I encourage you to do so. 

We are both Democrat and Republican. We are here about issues 

that are of particular concern to our communities, and health care 

is one of those big concerns. 

Secretary Thompson, a lot of them came because they heard that 

you were going to be here this afternoon, to have an opportunity. 

I just thank my colleagues for yielding the time and allowing me 

to speak out of order. This is my great sorority, Delta Sigma Theta. 

It is a national public service sorority, and, in fact, we were just 

named as a nongovernmental organization to the United Nations, 

one of the first sororities to have that opportunity. 

So, thank you, Mr. Ranking Member. Thank you, Mr. Chairman. 

Mr. RANGEL. Mr. Secretary, welcome. These are difficult times. 

We have deficits that our imagination has never been able to keep 

up with. We hope during your presentation you might share with 

us how the budget was off by some $132 billion, $134 billion, where 

the President of the United States claimed that he did not even 

know what the full and precise cost estimates would be. We also 

are concerned, as I spoke with you earlier, about this media budget 

for a bill that actually takes place in 2006. 

6 

We understand that over $22 million is being spent to mail fullcolor brochures and buy television (TV) network time. We also are 

concerned with the fact that the media company that is hired for 

this appears to be involved in other political activities. With the 

cost of health care going up and the budgets going down in certain 

areas, we are concerned with this, these type of expenditures. 

As relates to issues that are more specific, I am going to ask, 

with the Chairman’s permission, for the Ranking Member of the 

Subcommittee on Health to share this time with me. 

Mr. STARK. Thank you. Thank you, Mr. Chairman and Ranking 

Member. Welcome, Governor. Now, I won’t go on about fish tales, 

because sometimes when the Governor is good enough to provide 

one of Wisconsin’s delights to me as just a gift of friendship, then 

we find out—and he was quite up front about admitting that these 

walleye pike came from Canada—and perhaps he will tell us more 

about how the budget figures grew. 

In regard to the campaign, advertising campaign, Secretary, the 

fact is that Medicare beneficiaries cannot under the new law keep 

their same Medicare. The law increases the Part B deductible to 

$110. It is seniors with incomes of over $80,000, will have to pay 

higher Part B premiums. 

If the senior has a Medigap policy that covers prescription drugs, 

they are going to have to switch policies to assure that they can 

participate in the drug benefit. In many States, they will pay more 

for their drugs than they do under current law, and they may see 

their coverage reduced. We think that perhaps as many as 3 million retirees will see their employers drop their better retiree drug 

benefits, and millions of beneficiaries will be subject to a privatization program down the road. 

When I last checked, they weren’t allowed to opt out of the experiments that are in the bill. So, it is not right to tell seniors that 

their Medicare will remain unchanged. In fact, it is changing quite 

a bit, and in many instances will cost more than they are paying 

today. It is one of the reasons that I have asked the U.S. General 

Accounting Office (GAO) to review the ads and determine if they 

are really an appropriate use of taxpayers’ funds. 

The Advantage program, which lauds the billions of additional 

funds to managed care plans—in fact, will cost us $46 billion over 

the next 10 years—is really just extra money to the managed care 

industry, those very plans that caused us the problems under 

Medicare+Choice. 

I guess one of the most disturbing things in your testimony, and 

perhaps it has been revised, is that nowhere in your testimony is 

there any discussion about what the Administration plans to do to 

help the uninsured. The President didn’t mention it in his State of 

the Union Address, and we have got 42 million uninsured Americans. 

There has been no effort on the part of the Administration to 

control health costs for those of us like Members of Congress who 

are lucky enough to have insurance. So, I guess if you don’t mention the uninsured, it is because the President doesn’t think that 

we need anything more than tax credits. I hope you can discuss 

some of those issues with us. 

7 

I would rather hope that you are aware that the typical family 

in this country, in a reasonably priced group marketplace, would 

have to pay about $9,100 a year for a group policy, if they could 

get it. Yet the President is proposing a tax credit capped at $3,000 

for a family earning $25,000 a year. Where are they going to come 

up with at least $6,100 more than that escapes me. 

My final comment is this. For us, as politicians—and I would say 

this in a bipartisan sense—the record of Presidents and Members 

of Congress as being representatives of strong marriages is pretty 

shabby. Why we should be spending a billion dollars or more to 

promote marriage when we can’t define it—we are going to have 

a fight over who should be married and who shouldn’t be married 

just in the politics that are going on. It seems to me that a billion 

dollars could be better spent on allowing mental health to have 

equal stature in health insurance, and that getting professional 

treatment might be a better way to help families stay together and 

grow together than going out into finding some new experts in 

teaching people how to be married. 

I would say the same thing goes for $130 million for abstinence 

programs, which I find difficult to discuss in all seriousness, but I 

think these are foolish and folly. This is money, hundreds—over— 

billions of dollars that we could better spend on children and people who need the help. 

So, I hope that these initiatives might be sidetracked, and we 

might spend whatever money is there in a way that would better 

promote the health of Americans. I look forward to your testimony 

and the questions. Thank you, Mr. Chairman. 

Chairman THOMAS. Thank you. Prior to recognizing the Secretary, the Chair would like to place in the record a letter from the 

Congressional Budget Office (CBO) that was sent to myself, and a 

carbon to Mr. Rangel; also to the Chairman of the Committee on 

Energy and Commerce; and Senators Nickles, Grassley, and the 

Chairman of the Budget Committee, Mr. Nussle, which I am sure, 

with carbons to their Ranking Members. 

It is from Douglas Holtz-Eakin, outlining CBO’s position on the 

numbers. The pertinent sentence: ‘‘therefore, CBO believes its estimate is sound and has no reason, at present, to revise it.’’ 

I am sure the Secretary will discuss it with some supporting documentation. Without objection. 

[The information follows:] 

Congressional Budget Office 

Washington, DC 20515 

February 2, 2004 

Honorable William ‘‘Bill’’ M. Thomas 

Chairman 

Committee on Ways and Means 

U.S. House of Representatives 

Washington, DC 20515 

Dear Mr. Chairman, 

CBO’s baseline budgetary projections released in the Budget and Economic Outlook include $395 billion in outlays over 2004 to 2013 for the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173). That 

amount is identical to CBO’s scoring of the bill when passed. In contrast, the AdVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 E:\HR\OC\A228A.XXX A228A
8 

ministration estimates that additional outlays resulting from that act will total $534 

billion over the 2004–2013 period. 

Of course, a complete comparison of the overall, budgetary impact of the legislation must also consider the effect on revenues. CBO estimates that the revenue effects of the legislation are largely offsetting. The legislation reduces revenues by 

providing qualified taxpayers with health savings accounts. At the same time, it increases revenues, CBO estimates, as businesses reduce expenditures on nontaxable 

health benefits and increase them on taxable wages. The Administration has not released its estimated effects of the legislation on revenues. Those estimates could certainly differ from CBO’s. 

Because the new prescription drug program represents a major departure from 

what currently exists, there is a great deal of uncertainty about its budgetary impact and a wide range of possible outcomes. CBO’s estimate was the result of extensive analyses of the pharmaceutical drug market, the Medicare program, and the 

likely responses of potential enrollees. To date, we have not received any additional 

data or studies that would lead us to reconsider our conclusions. Therefore, CBO believes its estimate is sound, and has no reason, at present, to revise it. 

CBO has consulted with the Administration to identify the major factors that account for the differences between the two estimates. Although such a comparison 

is complicated and we do not have complete detail on the key attributes, it appears 

that the difference derives from of differing assumptions or estimates in a number 

of areas. Attached is a summary of those major differences. We will continue to 

work with the Administration to understand the differences in more detail. 

I hope this information is helpful to you. The CBO staff, contact for this analysis 

is Tom Bradley, who can be reached at 226–9010. 

Sincerely, 

Douglas Holtz-Eakin 

Director 

Enclosure 

cc: Honorable Charles B. Rangel, Ranking Member 

Identical letters sent to Honorable W.J. ‘‘Billy’’ Tauzin, Honorable Don Nickles, 

Honorable Charles E. Grassley, and Honorable Jim Nussle 

f 

In addition to that, so that we know what we are talking about, 

I want to include this 2-page multicolor flyer which is the Centers 

for Medicare & Medicaid Services (CMS) explanation of the new 

program. Without objection, we would put that in the record. 

[The information follows:] 

9 

10 

11 

To allow for some understanding and comparison, I would also 

like to put in the record a 1996 HHS handbook from the previous 

Administration. Heavy cover. Completely blank picture on this 

side. A picture of the Secretary, a picture of the administrator, with 

a brief greeting, 30 pages of gray material printed out, and with 

a bulk-rate stamp on the back, mailed to every senior. Of course, 

I appreciate our colleagues on the other side of the aisle’s concern 

at the time this was mailed to seniors, when in fact, not one page 

in here discusses a prescription drug program for seniors, as this 

2-page document discusses as early as this June in terms of a discount card. Without objection, the Chair would place that in the 

record. 

[The information is being retained in the Committee files.] 

Secretary, nice to have you with us again. Your written testimony will be made a part of the record, and you may address us 

in any way you see fit. 

STATEMENT OF THE HONORABLE TOMMY G. THOMPSON, SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Mr. THOMPSON. Thank you very much, Mr. Chairman. First let 

me thank you for giving me this opportunity to testify, and the 

same for you, Congressman Rangel. I also would like to join with 

Congresswoman Tubbs Jones in welcoming the wonderful sorority 

Delta to the Capitol today, and hope that they will listen to some 

of the questions and get some of the answers that they are hoping 

for as far as health care is concerned. 

I also want to thank all Members of this Committee for allowing 

me this opportunity to discuss the President’s fiscal year 2005 

budget for HHS. 

In my first 3 years at the Department, we have made, I believe, 

tremendous progress in improving the health, the safety, and the 

independence of the American people. We continue to advance in 

providing health care to seniors and to lower-income Americans, in 

improving the well-being of children and strengthening families, 

and in protecting the homeland. 

We are building a new public health infrastructure in order to 

give doctors and hospitals the tools they need to respond to any 

public health emergency. We have reenergized the fight against Acquired Immune Deficiency Syndrome (AIDS) at home and abroad. 

We increased access to quality health care, especially for minorities, the uninsured, and the underinsured. With your help, 2 

months ago President Bush signed the most comprehensive improvements to Medicare since it was created nearly four decades 

ago. 

To expand on our achievements, the President proposes $580 billion for HHS for fiscal year 2005, an increase of $32 billion, or 6 

percent, over fiscal year 2004. 

Our discretionary budget authority is $67 billion, an increase of 

$819 million, or 1.2-percent increase over fiscal year 2004 and an 

increase of 26 percent since 2001. 

President Bush seeks to build on the success of the 1996 Welfare 

Reform (P.L. 104–193) law by reauthorizing the successful Temporary Assistance for Needy Families (TANF) program to help 

12 

more welfare recipients achieve independence through work and 

protect children and strengthen families. I appreciate this body’s 

approval of TANF reauthorization last year, and I look forward to 

working with all of you to shepherd this bill through the Senate 

this year. We can and we should accomplish this critical goal this 

year. 

We are also working to protect our most vulnerable children. The 

Federal Government will spend nearly $5 billion this year for foster 

care. We would fund existing adoption bonuses as well as the new 

bonuses that Congress approved last year with $35 million for 2004 

and $32 million for 2005. 

To support our commitment to helping families in crisis and to 

protecting children from abuse and neglect, President Bush has requested full funding, $505 million for the promotion of the Safe and 

Stable Families program. Of course, the new Medicare Modernization Act is a significant accomplishment for our Department. 

Adding these benefits and choices and educating seniors about 

them will become a significant challenge. You and your fellow lawmakers were right to follow the CBO’s score in making decisions. 

When CBO scores the budget we submitted last week, it would be 

expected, as was introduced by the Chairman, that the estimate 

would reflect the $395 billion of that particular amount. 

I would like to direct your attention to the chart. There is a lot 

of discussion about the differences between CBO and the Office of 

the Actuary estimates of the Medicare Modernization Act. 

[The chart follows:] 

13 

The bottom blue strip consists of $47 billion. Now, this is the difference between participation. The CBO does not believe as many 

of the low-income seniors are going to participate as much as the 

CMS Actuary does. That difference is $47 billion. 

Now, I have asked our actuaries to sit down with CBO and be 

able to try and explain those differences when they come in front 

of this Committee, I believe at a later date, to discuss that. 

The second one is $32 billion. This—all the four blue are for Title 

1. That is your drug portion of Medicare. The $32 billion is the difference between CBO and our actuaries, and is based upon who is 

going to participate. You have a universe of 100 percent. Our actuaries subtract 5 percent from that figure for those individuals that 

will remain with their employer’s coverage. That gets it down to 95 

14 

percent. They believe that only 94 percent of the 95 percent will 

participate in Title 1, the drug card. 

The CBO, on the other side, does not believe that. Under Part 

B, only 91 percent of the people participate in Part B. The CBO 

says that if you don’t participate in Part B, it is very doubtful that 

you will participate in Part D as well. Therefore, they subtracted 

out the 9 percent, and they reduced the balance down to 91 percent, and then they said only 87 percent of those will continue to 

participate. That difference between 87 percent and 94 percent of 

who will participate is a difference of $32 billion. 

Then the difference in Medicaid savings. The CBO does not believe that there were any States that had prescription drug coverage that was budget neutral. They believe that when Part D 

comes into play, that they will take that over and they will drop 

their State programs, making a savings. Our actuaries believe that 

there were savings built in when we granted the waivers for those 

States to set up the program. Therefore, there will not be any savings. 

Also there is a difference as to ‘‘woodwork effect.’’ When people 

find out about Part D, there are going to be more people applying 

for it. Therefore, they are going to find out that they may also be 

eligible for Medicaid. That is the difference of the $18 billion. 

Then the final one under blue is $3 billion. We believe that CBO 

is estimating an additional $3 billion more that the States will be 

paying in when they participate in the Medicaid program. 

The second one is Title 2. This is where the plans come into play, 

and there is a difference of $30 billion there. We believe that—CBO 

believes that only 14 percent of the people will participate in the 

plans. Right now it is 11.8 percent. They believe it is only going 

to go up to 14 percent. Our actuaries believe it will be one-third. 

That is the difference between $30 billion. 

Then there is a stabilization fund of $2 billion that CBO does not 

believe we will ever use, and our actuaries believe that it will. That 

is the difference. 

Then the remaining 10 Titles of the new Medicare bill have a difference of $7 billion. That is the difference of $139 billion between 

CBO and our actuaries. 

Now, finally, I don’t have enough time to get into the new benefit 

proposals, but it appears that more than half of the current enrollees will see better benefits and that almost half of the current enrollees will see reduced premiums or cost sharing. 

The bottom line is that extra payments are providing more to 

beneficiaries, just as was intended by the Medicare Modernization 

Act. We look forward to working with Congress, the medical community, and all Americans as we implement the new Medicare law 

and carry out the initiatives that President Bush is proposing to 

build a healthier, safer, and stronger America. 

I don’t have time to go into the uninsured or the advertising program, but I am sure there will be questions about that, and I 

would be more than happy to answer them when they come up. 

Thank you for giving me this opportunity to give you the explanation on the difference of the figures. 

[The prepared statement of Mr. Thompson follows:] 

15 

Statement of the Honorable Tommy G. Thompson, Secretary, U.S. 

Department of Health and Human Services 

Good morning, Mr. Chairman and members of the Committee. I am pleased to 

present to you the President’s FY 2005 budget for the Department of Health and 

Human Services (HHS). I am confident you will find our budget to be an equitable 

proposal to improve the health and well-being of our Nation’s citizens. 

This year’s budget proposal builds upon HHS accomplishments in meeting several 

of the health and safety goals established at the beginning of the current Administration. This year, Congress passed the comprehensive Medicare reform legislation, 

adding prescription drug coverage for seniors and modernizing the Medicare program. 

• Since 2001, with the support Congress, the Administration has funded 614 new 

and expanded health centers that target low-income individuals, effectively increasing access to health care for an additional three (3) million people, a 29 

percent increase. • The Department established the Access to Recovery State Vouchers program, 

providing 50,000 individuals with needed treatment and recovery services. • To support the President’s faith-based initiative, HHS has created the Compassion Capital Fund for public/private partnerships to support charitable groups 

in expanding model social services programs. We awarded 81 new and continuing grants in 2003. • HHS initiated a new Mentoring Children of Prisoners program to provide oneto-one mentoring for over 30,000 children with an incarcerated parent in FY 

2004. The Department also created education and training vouchers for foster 

care youth, providing $5,000 vouchers to 17,400 eligible youth. • In August 2001, the President and I invited States to participate in the Health 

Insurance Flexibility and Accountability (HIFA) demonstration initiative. States 

use HIFA demonstrations to expand health care coverage. As of January 2004, 

HIFA demonstrations had expanded coverage to 175,000 people, and another 

646,000 were approved for enrollment. 

I could go on listing our achievements to you and the Committee, Mr. Chairman, 

but instead I have chosen to highlight a few that we are most proud of. For FY 2005, the President proposes an HHS budget of $580 billion in outlays 

to enable the Department to continue working with our State and local government 

partners, as well as with the private and volunteer sectors, to ensure the health, 

well-being, and safety of our Nation. Through the programs and services presented 

in the budget plan of HHS, Americans will receive new health benefits and services, 

be better protected from the threat of bioterrorism, benefit from enhanced disease 

detection and prevention, have greater access to health care, and will see improved 

social services through the work of faith- and community-based organizations and 

a focus on healthy family development. This proposal is a $32 billion in outlays increase over the comparable FY 2004 budget, or an increase of about 5.9 percent. The 

discretionary request for the HHS budget totals $67 billion in budget authority, a 

1.2 percent increase. 

Your committee, Mr. Chairman, has jurisdiction over much of this budget. I am 

grateful for the hard work and achievements we have made together. Allow me to 

draw your attention to several key factors of the HHS budget so that we may continue to work together to address the needs of our Nation. 

Medicare and Medicaid Reform/Modernization 

I am proud to remind the Committee of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which President Bush signed into law 

December 8, 2003. With the implementation of MMA, the Department faces many 

challenges in the coming fiscal year. As the most significant reform of Medicare 

since its inception in 1965, the law expands health plan choices for beneficiaries and 

adds a prescription drug benefit. MMA will strengthen and improve the Medicare 

program, while providing beneficiaries with new benefits and the option of retaining 

their traditional coverage. The HHS FY 2005 budget request includes about $482 

billion in net outlays to finance Medicare, Medicaid, the State’s Children’s Health 

Insurance Program, the Health Care Fraud and Abuse Control Program, state insurance enforcement, and the Agency’s operating costs. 

Drug Discount Card 

MMA establishes a new, exciting Medicare approved prescription drug discount 

card program, providing immediate relief to those beneficiaries who have been burdened by their drug costs. From June 2004 through 2005, all Medicare beneficiaries, 

except those with Medicaid drug coverage, will have the choice of enrolling in a 

16 

Medicare-endorsed drug discount card program. With the discount card, beneficiaries will save an estimated 10 to 15 percent on their drug costs. For some, savings may reach up to 25 percent on individual prescriptions. A typical senior with 

$1,285 in yearly drug expenses could save as much as $300 annually. To enroll, 

beneficiaries will pay no more than $30 annually. Those with low incomes will qualify for a $600 per year subsidy to purchase drugs. Medicare also will cover the enrollment fees for low-income seniors. 

Voluntary Prescription Drug Benefit 

Responding to President Bush’s pledge to add meaningful drug coverage to Medicare, MMA establishes a new voluntary prescription drug benefit under a new Medicare Part D. Starting in 2006, Medicare beneficiaries who are entitled to Part A, 

or enrolled in Part B, can choose prescription drug coverage under the new Part D. 

Under Part D, beneficiaries can choose to enroll in stand-alone, prescription drug 

plans (PDPs) or Medicare Advantage prescription drug plans (MA–PDs), and will be 

able to choose between at least two plans to receive their benefit. The law contains 

important beneficiary protections. For example, while the plans are permitted to use 

formularies, they must include drugs within each therapeutic category and class of 

covered Part D drugs, allowing beneficiaries to have a choice of drugs. In instances 

in which a drug is not covered, beneficiaries can appeal to have the drug included 

in the formulary. To reduce the number of prescribing errors that occur each year, 

HHS will develop an electronic prescription program for Part D covered drugs. 

Medicare Advantage 

MMA replaces the Medicare+Choice program with a new program called Medicare 

Advantage, which will operate under Part C of Medicare. Starting in 2004, the new 

law changes how private plans operating under Part C will be paid. In response to 

the increasing costs of caring for Medicare beneficiaries, the law increases payments 

to managed care plans by $14.2 billion over 10 years. These enhanced payments will 

allow private plans to provide more generous coverage, including benefits that traditional Medicare may not offer. Specifically in 2004, plans must use these funds to 

provide additional benefits, to lower premiums and/or cost-sharing, or to improve 

provider access in their network. This increased compensation will also encourage 

more private plans to enter the Medicare market, improving beneficiaries’ overall 

access to care. 

Under Medicare Advantage, local managed care plans will continue to operate on 

a county-by-county basis. Beginning in 2006, Medicare Advantage also will offer regional plans, which will cover both in-network and out-of-network services in a 

model very similar to what we in the Federal Government enjoy through the Federal Employee Health Benefits Program. There will be at least 10 regions, but no 

more than 50. The regional plans must use a unified deductible and offer catastrophic protection, such as capping out-of-pocket expenses. 

The changes in the Medicare Advantage program will provide seniors with more 

choices, improved benefits, and provide beneficiaries a choice for integrated care— 

combining medical and prescription drug coverage. We project that 32 percent of 

Medicare beneficiaries will enroll in Medicare Advantage plans by 2010. 

Providers and Rural Health 

Recognizing geographic disparities in Medicare payments, MMA provides much 

needed relief to rural providers by equalizing the standardized amounts paid to both 

urban and rural hospitals. Along with standardizing the base payment amounts to 

both urban and rural hospitals, MMA reduces the labor share of the standardized 

payment amount. In addition, Mr. Chairman, MMA increases payments for Disproportionate Share Hospitals (DSH) and provides greater flexibility to Graduate 

Medical Education (GME) residencies. The new law also increases flexibility for hospitals seeking Sole Community Hospital (SCH) status and eases the requirements 

for achieving Critical Access Hospital (CAH) status. Critical Access Hospitals will 

receive increased payments under MMA, as the payment rate will be increased to 

101 percent of allowable costs. 

Providers will see increased reimbursements under MMA. Physicians practicing 

in defined shortage areas will receive an additional 5 percent payment bonus. Home 

Health Agencies in rural areas also will receive a 5 percent bonus. In a change for 

rural hospice providers, more freedom will be given to utilize nurse practitioners. 

The law also creates an Office of Rural Health Policy Improvements and requires 

demonstration projects involving telehealth, frontier services, rural hospitals, and 

safe harbors. 

17 

Preventive Benefits 

MMA expands the number of preventive benefits covered by Medicare beginning 

in 2005. Through a particularly important provision, an initial preventive physical 

examination will be offered within six months of enrollment for those beneficiaries 

whose Medicare Part B coverage begins January 1, 2005 or later. The examination, 

as appropriate, will include an electrocardiogram and education, counseling, and referral for screenings and preventive services already covered by Medicare, such as 

pneumococcal, influenza and hepatitis B vaccines; prostate, colorectal, breast, and 

cervical cancers; in addition to screening for glaucoma and diabetes. Diabetes and 

cardiovascular screening blood tests do not have any deductible or co-payments, as 

Medicare pays for 100 percent of these clinical laboratory tests. 

Regulatory Reform/Contracting Reform 

MMA includes a number of administrative and operational reforms, as well. For 

example, regulatory reform provisions require the establishment of overpayment recovery plans in case of hardship; prohibit contractors from using extrapolation to determine overpayment amounts except under specific circumstances; describe the 

rights of providers when under audit by Medicare contractors; require the establishment of standard methodology to use when selecting a probe sample of claims for 

review; and prohibit a supplier or provider from paying a penalty resulting from adherence to guidelines. In addition, MMA allows physicians to reassign payment for 

Medicare services to entities with which the physicians have an independent contractor arrangement. Under the new law, final regulations are to be published within three years, and all measures of a regulation are to be published as a proposed 

rule before final publication. 

Also under the law, as Secretary, I will be permitted to introduce greater competitiveness and flexibility to the Medicare contracting process by removing the distinction between Part A and Part B contractors, allowing the renewal of contracts annually for up to five years, limiting contractor liability, and providing incentive payments to improve contractor performance. These changes will enhance HHS efficiency and effectiveness in program operations. 

Regarding Medicare appeals, MMA changes the process for fee-for-service Medicare by requiring the Social Security Administration and HHS to develop and implement a plan for shifting the appeals function from SSA to HHS by October 1, 2005. 

MMA also changes the requirements for the presentation of evidence. This also will 

enhance the efficiency and effectiveness of the operation of the Medicare program. 

Medicare and Medicaid Estimates 

Historically, HHS and the Congressional Budget Office (CBO) have provided differing estimates of Medicare and Medicaid spending. It is not uncommon for different assumptions underlying the respective estimates to produce differences in 

cost projections. This year’s new estimates include the changes resulting from enactment of MMA. 

When Congress considered this Act, Mr. Chairman, CBO estimated the cost of the 

bill at $395 billion from 2004 to 2013. The HHS actuaries have recently estimated 

the cost of the law as $534 billion from 2004 to 2013. Last week, the CBO Director 

told the House and Senate Budget Committees that CBO has not changed its estimate and that they continue to believe that the cost of the bill is $395 billion. Because the Medicare legislation makes far-reaching changes to a complex entitlement 

program with many new private-sector elements, there is even larger uncertainty 

in these estimates than usual. 

The two sets of estimates provide a reasonable range of possible future cost scenarios for Medicare spending. The tremendous uncertainty surrounding estimates of 

the newly-enacted Medicare law has resulted in a plausible range of estimates of 

future cost scenarios for Medicare spending, from the $395 billion estimate from 

CBO to the $534 billion estimate from the Medicare actuaries. It should be noted 

that this difference of $139 billion is approximately two (2) percent of the projected 

$7 trillion in total Federal Medicare and Medicaid spending over the same period, 

as projected by HHS. 

Additional MMA Changes 

We are currently reviewing the new benefit proposals submitted by health plans 

and will have detailed information very soon on how this extra funding is helping 

Medicare beneficiaries. In general it looks like over half of current enrollees will see 

better benefits, and nearly one-half will see reduced premiums or cost sharing. 

When looking at the average premium paid by enrollees across all plans, this premium may be decreasing by as much as one-third. The bottom line is that the extra 

payments are working as required by the MMA—to provide more to beneficiaries. 

18 

MMA addresses other issues facing the Medicare program including the program’s 

long-term, financial security. To contain costs in the Medicare program, the law requires the Medicare Trustees, beginning in the 2005 annual report, to assess whether Medicare’s ‘‘excess general revenue funding’’ exceeds 45 percent. As defined in the 

law, excess general revenue funding is equal to Medicare’s total outlays minus dedicated revenues. The Medicare Trustees shall issue a ‘‘warning’’ if general revenues 

are projected to exceed 45 percent of Medicare spending in a year within the next 

seven years. If the Trustees issue such a warning in two consecutive years, the law 

provides special legislative conditions for the consideration of proposed legislation 

submitted by the President to address the excess general revenue funding. 

Marriage and Healthy Family Development 

This year, Mr. Chairman, the President is proposing a new marriage and healthy 

family development initiative. This Initiative is supported by funding increases in 

this Department’s FY 2005 budget, encompasses a variety of new and existing programs, and impacts both mandatory and discretionary programs. 

Building on the considerable success of welfare reform in this great Nation, the 

President’s FY 2005 Budget maintains the framework of the Administration’s welfare authorization proposal. Mr. Chairman, we are committed to working with the 

Congress in the coming months to ensure the legislation moves quickly and is consistent with the President’s Budget. The President’s proposal includes five years of 

funding for the TANF Block Grant to States and Tribes; Matching Grants to Territories; and Tribal Work Program. A new feature, intended to support the President’s 

Marriage and Healthy Family Development Initiative, is a proposal for increased 

funding for two key provisions in our welfare reform package. 

A cornerstone of the President’s commitment to strengthen and empower America’s families through welfare reform provides targeted resources to family formation 

and healthy marriage strategies. Statistics tell us that children from married two 

parent families are less likely to end up in poverty, drop out of school, become addicted to drugs, have a child out of wedlock, suffer abuse or become a violent criminal and end up in prison. While government cannot create good marriages, it can 

play a role by providing resources and expertise so that individuals and couples are 

better prepared to form and maintain happy and healthy families. 

Beginning in FY 2005, the FY 2005 budget would provide an additional $20 million, a total of $120 million, under TANF to support research, demonstrations, and 

technical assistance primarily focused on family formation strategies and healthy 

marriages and an additional $20 million for matching grants to States, Territories, 

Tribes, and Tribal Organizations for innovative approaches to promoting healthy 

marriage and reducing out-of-wedlock births. A dollar-for-dollar match to participate 

in the grant program will be required, generating another $20 million in matching 

State and local funds. States can use Federal TANF funds to meet this matching 

requirement. In total, $360 million in Federal and State funding would be available 

in the FY 2005 Budget to broaden the Administration’s efforts to support healthy 

marriages and promote effective family formation. 

To reverse the rise in father absence and improve the well-being of our Nation’s 

children, the budget includes a total of $50 million for grants for public entities; 

nonprofits, including faith-based; and community organizations to design demonstration service projects. These projects will test promising approaches to improve 

outcomes for children by encouraging the formation and stability of healthy marriages and responsible fatherhood, and to assist fathers in being more actively involved in the lives of their children. 

President Bush also announced in his State of the Union address a new initiative 

to educate teens and parents about the health risks associated with premarital sexual activity and to provide the tools needed to help teens make responsible choices. 

To do this, the President proposes to double funding for abstinence education activities for a total of $273 million, including a request of $186 million, an increase of 

$112 million, for grants to develop and implement abstinence educations programs 

for adolescents aged 12 through 18 in communities across the country; the reauthorization of state abstinence education grants for five years at $50 million per year 

as part of the welfare reform reauthorization; another $26 million for abstinence activities within the Adolescent Family Life program; and a new public awareness 

campaign to help parents communicate with their children about the health risks 

associated with premarital sexual activity. 

In addition, the budget provides for significant increases to two state child abuse 

programs reauthorized this past year as part of the Keeping Children and Families 

Safe Act of 2003. The increase for the Child Abuse Prevention and Treatment State 

Grants will enable state child protective service systems to shorten the time to the 

delivery of post-investigative services from 48 to 30 days. The Community-Based 

19 

Child Abuse Prevention program will increase the availability of prevention services 

to an additional 55,000 children and their families. 

Child Welfare 

One of my highest priorities this year is to address the needs of some of this Nation’s most vulnerable children. The Federal government will spend nearly $5 billion 

for Foster Care this year. However, the program’s current structure does not allow 

States to do all they can to prevent a child’s removal from the home, reunify families when possible, and, when necessary, find an alternative safe and nurturing family environment. The current financing structure sends the wrong message by providing the bulk of funding only when children are removed from their homes. 

Our budget includes an option for States to receive their funds in an allotment, 

providing States more flexibility in the operation of their child welfare programs. 

The option gives States the opportunity to craft their program to meet the specific 

needs of their unique populations. The funds can still be used for foster care when 

needed, but also for prevention and other critical services. Furthermore, the HHS 

budget reflects savings associated with a legislative proposal to clarify the definition 

of ‘‘home of removal’’ in the foster care program in response to a court decision. The 

President’s FY 2005 budget also proposes $140 million for the Independent Living 

Program and $60 million for the Independent Living Education and Training Vouchers program. Additionally, to support the Administration’s commitment to helping 

families in crisis and to protecting children from abuse and neglect, the President’s 

FY 2005 budget requests $505 million, full funding, of the Promoting Safe and Stable Families program. I know we all agree that the safety of our Nation’s children 

is paramount and I look forward to working with Congress to rework the foster care 

program. 

Child Support Enforcement 

In my first two years at the Department, the Child Support Enforcement program 

collected and distributed $39 billion in child support. With the preliminary FY 2003 

collections figure, the three year total is an impressive $60 billion. This highly effective program provided $4.13 in child support collections for every Federal dollar invested in FY 2002. 

The President’s FY 2005 budget builds on the program’s success by arming the 

States with additional powerful tools to get the essential support that children need. 

Our newest proposals focus on critical improvements to collect medical child support. The first proposal notifies child support agencies if a child with a medical support order loses health care coverage (COBRA notices) so child support professionals 

can assist that family in providing continuous health care coverage. Another improvement will give States the authority to consider both parents’ access to health 

care coverage when establishing medical child support orders, with the option of enforcing these orders against both custodial and non-custodial parents. These improvements will help prevent lapses in children’s health care coverage, provide more 

children with private health care coverage, and lead to healthier children and families. 

Also included as part of the FY 2005 budget are proposals from the FY 2004 budget that provide new and improved tools to significantly increase collections to families, enhance and expand the existing automated enforcement infrastructure for 

Federal, State, and Tribal child support programs, and strengthen relationships between children and their absent parents. For example, one proposal increases resources for the Access and Visitation Program in support of the Administration’s 

commitment to building strong families. These funds have been effective in facilitating visitation between non-custodial parents and their children, among other important relationship building activities. This budget also includes proposals from the 

FY 2003 budget aimed at increasing collections and helping families achieve independence. Two key provisions, included as part of TANF reauthorization, provide 

States with the option to disregard and pass through additional child support collections to families on TANF and simplify distribution rules so that families formerly 

on TANF can receive the funds collected on their behalf. In total, these proposals 

should result in an additional $3 billion to families over five years. 

Compassion and Faith Based Agenda 

Compassion Capital Fund 

The FY 2005 budget requests $100 million for the Compassion Capital Fund, 

which creates public/private partnerships that support charitable organizations in 

expanding or emulating model social service programs. In 2003, HHS received over 

1,300 applications for both the intermediary and mini-grant programs. Sixty-two 

20 

new awards were made. The President has requested a $52 million increase over 

FY 2004 levels to reach a greater number of qualified organizations. 

Samaritan Initiative 

The President’s budget also continues and strengthens the Administration’s com- mitment to end chronic homelessness by proposing $70 million for the Samaritan 

Initiative, a new competitive grant program jointly administered by the Departments of Housing and Urban Development, Health and Human Services, and Veterans Affairs that supports the Administration’s efforts to end chronic homelessness 

by 2012. These grants will support the most promising local strategies to move 

chronically homeless persons from the streets to safe permanent housing with supportive services. Of the $70 million for the program, we are requesting $10 million 

at HHS for supportive services. 

Domestic and Global Health Improvements 

I would like to take a moment to share with the Committee a few other priorities 

that strengthen our efforts for a healthier U.S. Building on the accomplishment of 

the five-year doubling of the National Institutes of Health (NIH) budget, this year’s 

budget proposal includes $28.6 billion for NIH. These funds will continue to support 

the long-term stability of the biomedical research enterprise and ensure continued 

productivity in all areas of research at NIH. To bring medical research and advances to those who need it, $1.8 billion of the HHS budget proposal provides health 

care services to 15 million individuals through the Health Center program and an 

increase for the National Health Service Corps to initiate recruitment of nurses and 

physicians. 

The President’s budget proposal for FY 2005 also strives to meet the needs of our 

vulnerable populations. To protect our children from preventable illness, the budget 

proposes improvements to the Vaccines for Children (VFC) program to increase access to needed vaccines for underinsured children. In an effort to ensure we have 

enough vaccines when they are needed, the HHS budget request calls for a sixmonth stockpile of all regularly recommended vaccines for children, as well as for 

a stockpile of influenza vaccine for next winter. In addition to our Nation’s children, 

we must not forget those struggling yet who are ready to help themselves out of 

the cycle of addiction and dependency. For FY 2005, the President proposes to double the Access to Recovery State Voucher program, for a total of $200 million, to 

provide vouchers to approximately 100,000 individuals seeking substance abuse 

treatment services. 

Our Nation’s health, Mr. Chairman, is not dependent solely on access to care and 

treatment, but also on the security of our health in a global context. Our Nation 

faces threats from bioterrorism, disease outbreaks in other countries, and food-borne 

diseases and illnesses. The HHS budget targets $373 million of investments to accelerate the detection of and response to potential disease outbreaks of any kind, regardless of whether the pathogen is naturally occurring or intentionally released. 

The Food and Drug Administration (FDA) has already expanded its work dramatically to prevent intentionally contaminated foods from entering the U.S. The President’s FY 2005 budget takes the next step by making the needed investments in 

FDA to expand substantially the laboratory capacity of its State partners, and to 

find faster and better ways to detect contamination, particularly at ports, processing 

plants, and other food facilities. 

Management Improvements 

Finally, I would like to update the Committee on the Department’s efforts to use 

our resources in the most efficient manner. To this end, HHS remains committed 

to setting measurable performance goals for all HHS programs and holding managers accountable for achieving results. I am pleased to report that HHS is making 

steady progress. We have made strides to streamline and make performance reporting more relevant to decision makers and citizens. As a result, the Department is 

better able to use performance results to manage and to improve programs. By raising our standards of success, we improve our efficiency and increase our capability 

to improve the health of every American citizen. 

Improving the Health, Safety, and Well-being of Our Nation 

Mr. Chairman and members of the Committee, the budget I bring before you contains many different elements of a single proposal. The common thread running 

through these policies is the desire to improve the lives of the American people. Our 

FY 2005 HHS budget proposal builds upon our past successes to improve the Nation’s health; to focus on improved health outcomes for those most in need; to promote the economic and social well-being of children, youth, families, and communities; and to protect us against biologic and other threats through preparedness at 

21 

both the domestic and global levels. It is with the single, simple goal of ensuring 

a safe and healthy America that I have presented the President’s FY 2005 budget 

today. I know this is a goal we all share, and with your support, we at the Department of Health and Human Services are committed to achieving it. 

f 

Chairman THOMAS. Thank you very much, Mr. Secretary. As 

you well know and perhaps other people don’t, Congress is required 

to use the CBO estimates as provided to us for our determination 

of the costs. The letter that I just put in the record said that CBO 

has no reason to change their estimates of the $395 billion. 

Looking at your color chart, and of course the audience can’t see 

this—and we might turn it around at some point so that they can 

see the magnitudes—the big-bucks differences are in three areas, 

actually four areas, and they all involve an attempt to assume people’s behaviors several years from now, or close to a decade from 

now, as to what their decision is in either going with the program 

or not. The single biggest area I see is whether or not the low-income eligible are going to participate in the program. 

I think all of us here hope that whoever estimated the higher 

percentage of participation wins the guessing contest because, 

frankly, there are a number of people out there who could be receiving benefits today but aren’t. That would be the $47 billion. 

The difference—and this is where the size of the population and 

the dollars become somewhat staggering. If your estimators assume 

a 94-percent pick-up and CBO only estimates an 87-percent pickup, the difference between 94 and 87 percent over that 10-year period produces a $32 billion difference. That small of an estimate. 

So, if it is somewhere between 87 and 94 percent, if it is 88 or 89 

or 90 percent, the discrepancy shrinks. 

If that is the high and the low between 87 and 94 percent, it 

seems to me if you back away, if you are grading in school, the differences between a B-plus and an A-minus or an A-minus and an 

A—and for estimators over the 10 years that is maybe a 2-percent 

difference of the total amount, which isn’t all that bad. 

However, we are required by law to follow CBO. The Office of 

Management and Budget (OMB) has its own beliefs on what the 

take-up rates are. The higher participation in plans, the difference 

between 14 and 34 percent, would hope that CBO at 14 percent 

was a floor that is too low, your estimate of one-third or 34 percent 

take-up on the new plans is certainly optimistic. Again my assumption is it is going to be somewhere in between, which would then 

shrink the dollar amount if it were somewhere in between. 

Then the difference in Medicaid, and as you called it the ‘‘woodwork effect,’’ who is going to come out of the woodwork—I strongly 

believe that these support programs, especially those above the 100 

percent of poverty, the so-called Quimbys and Slimbys, since the 

States were the screening structure and they had to put in 50 cents 

of every dollar, I have not seen a uniformly aggressive recruitment 

program. Some States, frankly, did better than others. 

My strong belief, and I believe you shared it in your testimony, 

that when this is a national program—as it will be—we can, 

through uniform advertising and, frankly, the Federal Government’s role, increase the sign-up and therefore the participation of 

22 

low-income seniors at a much higher rate. If we are able to pick 

up more seniors who are eligible, and it costs us $18 billion in the 

difference in the analysis, I would prefer your more optimistic scenario about effectively going after people who already deserve these 

programs and aren’t taking them. When you add those four areas up, $127 billion of the $139 billion difference is attempting to guess behavior 6 to 8 years in the 

future. I certainly believe people have a difference of opinion as to 

how the take-up rates would attain. You come up with a figure $139 billion greater over 10 years 

than the CBO. We are always interested in why people are apart 

in terms of the assumptions that they make. When the trustee’s 

Social Security report is presented—and I believe that is usually in 

early March—the Chair is going to request the actuaries from the 

Administration and Dr. Holtz-Eakin, the head of the CBO, to appear before us on the same panel so that we can listen to the explanations of each, and perhaps have each quiz each other as we have 

done in the past, so that we can better understand this rather arcane area of estimating. 

It isn’t a surprise to me that two groups of actuaries beginning 

with different assumptions about behavior wind up at different dollar amounts. The tragedy, if there is any in this, is that they both 

have to come up with a specific dollar amount which we know is 

going to be wrong. You can’t guess a single number and be right. 

So, if you assume the bottom end was $395 billion and the top end 

was your $537 billion, $534 billion, somewhere in the mid-$400 or 

low $400 of billions would be more likely. Out of this, I hope all 

of us appreciate the difficulty in trying to pick a number based 

upon people’s behavior sometime in the future. I know some people 

were surprised that your number was higher. I personally was not, 

because of the conversations that were public between the Administration and Members of Congress about what they thought the opportunities for the programs in terms of getting seniors to adopt 

the programs were going to be. 

I think the safest statement to say is that I believe the CBO was 

a little pessimistic, and I believe that HHS is a little optimistic, 

and that the actual numbers will be somewhere in between. The 

point that we shouldn’t lose sight of is the point somewhere in between is a better Medicare, including prescription drugs, with far 

better preventative and wellness programs available to seniors 

than ever before. Especially at the period of that 30-page very slick, 

very expensive 1996 Medicare brochure with the pictures of the 

Secretary and the Administrator, the first thing that seniors saw, 

rather than the announcement that prescription drugs are available for seniors under Medicare for the first time. 

I look forward to more specific information from the Administration, especially in the area of health insurance. We are wrestling 

with a number of options; as my colleague from New York indicated, tax credits might be one approach, I believe there are other 

approaches, so that we can make sure that no American goes without health insurance. There is no reason why this society cannot 

provide it. 

The dollar amounts spent for medical insurance in this country 

certainly is a sufficient amount. The problem is it is maldisVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\A228A.XXX A228A
23 

tributed. Some people have insurance that allows them the luxury 

of overutilization in the system. Many don’t have it, and there is 

underutilization. 

A redistribution of the benefits, along with some adjustments in 

what people might be able to do in terms of creative policies, I believe will go a long way toward alleviating the fact that some 

Americans, through no fault of their own, have no health insurance. That is one of the commitments I hope everyone on this Committee will join me in saying; that as soon as possible, notwithstanding the political season, and if we aren’t able to make law in 

this area, certainly major strides in structuring a program that will 

answer the question of why Americans don’t have insurance. There 

is no reason why they shouldn’t, based upon the amount of money 

spent in the system. 

With that I would recognize the gentleman from New York for 

questions, if he wishes to inquire. Mr. RANGEL. Thank you, Mr. Chairman. The matter of $134 billion and the difference in estimates between CBO and OMB seems 

rather cavalier in view of the fact that throughout the debate on 

the floor and the Senate, the cost of the bill was of great concern 

to Members of the House. 

It seems like we are dealing with two different governments and 

we are—the professionals that are making the estimates don’t talk 

with each other, don’t share the same basis for making their estimates. Now, we thought over here that OMB and your office knew 

there would be a much, much higher cost in this program than the 

figures given to us by CBO. 

When did you first know, Mr. Secretary, that the differences 

would be in the range that we find today? 

Mr. THOMPSON. We knew all along, Congressman Rangel, that 

our assumptions were higher. We assumed that there were going 

to be more participation in the plans than with CBO. We made 

that view known, but the changes were made right up until the 

end. The day before it was reported out, there was an estimate by 

CBO that the cost was going to be $360 billion. 

The conferees decided that they were going to reduce the deductible, increase the benefits and lower—reduce the doughnut hole. 

That changed our assumptions. Our actuaries didn’t know that and 

didn’t have that information. This was the day before it was reported out of the conference committee. 

The second thing is our actuaries—and I testified to this a couple 

of times—based their estimates on only the three bottom plans to 

be utilized. The committee voted that it would not be limited to 

three plans. As a result of that, our actuaries indicated that the 

cost would be more. That information was known. 

The final assumptions were not made until after the conferees 

had reported out, and it was sent to the floor of the Senate and 

the House to be voted on. We did not get a final number from our 

actuaries until December 24th. I made that known to OMB at that 

particular time before Christmas, before I left. That was when we 

got it. Those assumptions were changing right up to the day that 

the bill was reported out of conference committee. 

Mr. RANGEL. Well, the President always talks about this subject being so important that he wanted a bipartisan bill before the 

24 

House. When did you first know that House Democrats were not 

involved in the conference since these estimates were discussed? 

When did you first know that we were barred from the conference? 

Mr. THOMPSON. Well, Congressman Rangel, I was in that conference committee. I knew that you came in one day and were 

upset that you were not allowed to stay. 

Mr. RANGEL. Well, you are being very kind, Mr. Secretary, but 

you tell the President, if you will, that he ought to have more meetings at the White House so that Democrats would have some idea 

of how these things happen. 

Mr. THOMPSON. Thank you. 

Mr. RANGEL. Thank you. 

Chairman THOMAS. The gentleman from Illinois, Mr. Crane 

wish to inquire? 

Mr. CRANE. Thank you, Mr. Chairman. I want to express my 

appreciation that you are here with us today, Mr. Secretary. As you 

know, health savings accounts were made available to all Americans when the Medicare Prescription Drug Modernization Act was 

signed into law. I see that the President has included a proposal 

to allow people to buy high-deductible health insurance in conjunction with a health savings account and the ability to deduct 100 

percent of their premiums from their taxes. 

Mr. Secretary, do you believe that allowing individuals to deduct 

the premiums of a high-deductible plan will encourage the use of 

those plans and health savings accounts, and, in your opinion, 

would this tax deduction have a significant effect in reducing the 

number of uninsured in this country? 

Mr. THOMPSON. I believe that health savings accounts are 

going to be one of the better parts of reforming health insurance 

in America. I believe very strongly that health savings accounts are 

going to be very advantageous. I believe there is going to be a lot 

of participation in those particular accounts. I think it is going to 

help us reduce the uninsured. I am going to push very hard to 

make that an accomplishment. 

Mr. CRANE. Very good. One of the key goals of H.R. 1 was to 

improve health care choices for Medicare beneficiaries. In that spirit, we included a provision in the new law that requires drug plans 

to allow seniors to choose a 90-day supply of drugs at their local 

pharmacies when a 90-day supply of drugs is available through 

their drug plan’s mail order operation. 

It was clearly the intent of Congress to improve seniors’ choices 

by creating a level playing field between local pharmacies and mail 

order. I hope that when HHS implements the drug coverage portion of this law that you will work to make sure that drug plans 

do nothing to intentionally discourage seniors from choosing a 90- 

day supply of drugs from their local pharmacies. I am especially 

concerned that drug plans may attempt to steer seniors to their 

mail order businesses by requiring higher co-pays or other cost 

sharing just for choosing to obtain a 90-day supplement from their 

neighborhood pharmacy. That was not the intent of this Committee, and I urge you to be vigilant in preventing plans from doing 

this. Do you have any specific plans for preventing this from occurring? 

25 

Mr. THOMPSON. Well, we are going to be very vigilant, as you 

have admonished us to be, Congressman Crane. We are going to 

use the procedures to make sure that that does not happen. We are 

very aggressive in making sure that seniors are treated properly 

and correctly, and we want to make sure that we carry out the will 

of the Congress and the will and intent of this Medicare Modernization Act. We will do everything we possibly can to prevent 

any kind of scamming that may possibly be considered. 

Mr. CRANE. Well, thank you very much, Mr. Chairman—or, excuse me, Secretary. Let me commend you for all of the outstanding 

work that I think you have been doing. Keep the faith, fight the 

fight. 

Mr. THOMPSON. Thank you very much, Congressman Crane. 

Chairman THOMAS. The gentleman from California, Mr. Stark, 

wish to inquire? 

Mr. STARK. Thank you, Mr. Chairman. I—I thought as long as 

you are putting things in the record, I would ask unanimous consent that we put in the record a letter from the National Taxpayers 

Union, a group with whom I rarely agree. They wrote a letter to 

Secretary Thompson suggesting that we ought not to have the $12 

million advertising campaign. That is, for a variety of reasons, a 

waste of money. I would ask that that go in. 

Chairman THOMAS. Without objection. 

[The information follows:] 

National Taxpayers Union 

Alexandria, Virginia 22314 

February 5, 2004 

The Honorable Tommy Thompson 

Secretary 

Department of Health and Human Services 

200 Independence Avenue, SW 

Washington, DC 20201 

Dear Secretary Thompson: 

On behalf of the 350,000-member National Taxpayers Union (NTU), I write to request that the Bush Administration immediately terminate the planned $12.6 million ad campaign on behalf of the forthcoming Medicare prescription drug benefit. 

We also ask you to cease all other publicly funded expenditures on items such as 

mailings and meetings which seem to be little more than public relations efforts to 

build support for this expensive new program. 

Given that the heart of the new program doesn’t begin until 2006, it is very hard 

to draw any conclusion about advertising this year other than that it is focused 

much more on the coming elections. While your ‘‘Same Medicare, More Benefits’’ 

campaign may be welcomed by politicians running for election in 2004, we can see 

little public benefit from a campaign beginning 2 years prior to the commencement 

of prescription drug insurance. 

Even when there is no election agenda, NTU and fiscal conservatives across the 

country deplore taxpayer-funded advertising promoting big government. The outrage 

is compounded by your Department’s recent embarrassing admissions that the prescription drug program will cost far more than what was promised to the American 

public last fall. These revelations are no surprise to NTU or the 45 citizen, taxpayer, 

and conservative groups from around the county who joined us in opposing this 

measure. Our broad coalition repeatedly warned wavering Members of Congress 

that this would be the case (supporters, of course, assured otherwise). We believe 

these belated admissions of the true cost provide one more reason to shut down all 

HHS advertising efforts. 

The Medicare prescription drug legislation has added trillions to the unfunded liabilities facing the nation. This $12.6 million ad campaign, timed in accord with the 

26 

2004 elections rather than the start of the program, adds insult to injury, and we 

believe the American public would be best served by its immediate termination. 

Sincerely, 

John Berthoud 

f 

President 

Mr. STARK. Also, I would like to go back to this 2-page brochure 

that you put in the record, and just point out—and see if the Secretary is aware of that—it says that all people will be able to enroll, all people with Medicare will be able to enroll in the plans. 

Isn’t it a fact that it is limited to a 6-month window, and there 

could be significant penalties if they come in after that? 

Mr. THOMPSON. There is a 6-month window. Yes, there is, Mr. 

Congressman. Mr. STARK. Then you talk about a premium of $35 a month, and 

I am curious as to where you got that amount. 

Mr. THOMPSON. That is the assumption by the conferees, the 

assumption by CBO. That was also the assumption made by our 

actuaries at CMS. 

Mr. STARK. But it is not in the law anyplace? 

Mr. THOMPSON. It is not in the law. 

Mr. STARK. That is kind of a guess as to what it might be. It could be $150 a month, could it not? 

Mr. THOMPSON. We are looking at our figures and statistics. It 

is our best judgment and expertise from our actuaries that it will 

be $35, Congressman Stark. 

Mr. STARK. That is of the actuaries, not from CBO? 

Mr. THOMPSON. That is correct. It is also the actuaries at 

CMS, but also at CBO as well. Both of them. That is one area that 

they are pretty much in agreement on. 

Mr. STARK. Well, I can go on, but there are in here—I would 

like to add to the record an annotated issue here. For example, you 

mentioned a wellness physical exam. Although you do suggest that 

it is within the—when you first enroll, but other seniors currently 

enrolled aren’t eligible for that benefit, are they? 

Mr. THOMPSON. These are for new enrollees. 

Mr. STARK. You do state that, I must add. Also on the drug savings card, the discount card, I understand you have had quite a few 

applications for different drug plans. Again the—the news release 

on August 30th from your Department suggested that the discount 

card will yield an average of 10 to 13 percent, possibly 15 percent. 

Wasn’t that your August 30th release? 

Mr. THOMPSON. If you have the release, it speaks for itself. I 

can’t remember what I did on August 30th, Congressman. 

Mr. STARK. I guess that the 25 percent, because it is on average, which is terribly misleading, Mr. Secretary, and I am sure you 

know that, because some drugs aren’t covered at all by these plans 

and some drugs that are very rarely used are covered to a greater 

discount. I just—I find in here a little bit of lack of truth in advertising. 

Then on the—and I will tell you that many of us feel that you 

had suggested that congressional staff heard about the actuaries’ 

estimates. We didn’t on our side, and I think you know that. Scully 

27 

said he wouldn’t tell us, and he didn’t. Our staff was told they 

would have the information, and never received it. Perhaps the majority did receive it. It is not exactly fair, and I would defy anybody 

in your Department to show where any of us, except perhaps for 

the two Democrats who are allowed in to the conference, ever received any of those estimates that the actuaries had done last summer. 

Scully, we can beat up on him because he is gone to millionaire’s 

land now down on K Street, but he said in the press that he wasn’t 

going to allow us to have access to the actuaries anymore, and I 

suspect that is perhaps still in law. 

So, I would hope that as we go along, the Chairman and the Administration can pass any bills they want next year. So, if we have 

reliable information, maybe we can share it and come to a better 

agreement. I would certainly hope that the openness with which 

actuaries have shared information on both sides of the aisle in previous Administrations, and when the Democrats controlled the 

House, would continue. It ended last summer. I don’t think there 

is any question about that. Maybe it ended on both sides of the 

aisle. 

To shield that kind of information, I think, prevents us from getting the kind of information we need to make reasonable decisions 

or to have reasonable debate. I think that might—that same criticism might come from some of my more conservative colleagues on 

the other side of the aisle. I just hope that we could, as we go forward, have open access to actuarial estimates and we could—they 

could be shared, and that we could then debate policy and debate 

the outcome of these bills, using facts that all of us could agree on. 

Thank you, Mr. Secretary. 

Mr. THOMPSON. Thank you. Can I just quickly respond, Congressman Stark, on a couple of things? First off, the conference report language on low-income outreach, it states, and I will quote 

very quickly: 

‘‘The conferees expect that in carrying out the annual dissemination of information requires that the Secretary will conduct a significant public information campaign to educate beneficiaries about 

the new Medicare drug benefit to ensure the broad dissemination 

of accurate and timely information.’’ 

That is in the report language, plus it is also in the body of the 

law. 

Second thing. I cannot speak for Tom Scully; nobody speaks for 

Tom Scully, as everybody knows. He indicated to me that he was 

disseminating information. 

Third. I did, when I came up to the conferees, I did talk about 

some of the assumptions that our actuaries were making which 

were different than CBO. The CBO is the scorer for legislation by 

Congress, as you well know. 

The fourth thing is I think we should try and be more cooperative. I will tell you that my Department tries to reach out to Democrats and Republicans on both sides of the aisle as often and as 

best that we possibly can. We will continue to do that as long as 

I am Secretary, Mr. Stark. 

Mr. STARK. Thank you very much. 

28 

Chairman THOMAS. Thank the gentleman. Prior to calling on 

the gentleman from California, Mr. Herger, I would relate to the 

Secretary my long and arduous explanation to the previous Administration as to why the 1–800–Medicare number could be one digit 

longer than is necessary so it wouldn’t be 1–800–Medicar. 

The correct phone number aspect is 1–800–Medicar, but why in 

the world would you confuse someone by simply not adding another 

digit that would make it 1–800–Medicare. If any of you want to 

test this on a phone, you can actually punch one or more additional 

numbers following the minimum number necessary to trigger it, 

and it has no effect. 

It took us over a year to convince those bureaucrats that 1–800– 

Medicare was a better number than 1–800–Medicar. Sometimes 

progress is measured very minimally. The gentleman from California, Mr. Herger, wish to inquire? 

Mr. HERGER. I do. Thank you very much, Mr. Chairman. I am 

going to join in welcoming you, Mr. Secretary. I also want to thank 

you for your leadership not only with the Bush Administration, but 

as Governor of Wisconsin in the area of welfare reform. 

Mr. THOMPSON. Thank you. 

Mr. HERGER. As you are aware, welfare is up for reauthorization this year. Even though the House has passed it out twice, we 

are still having problems in the Senate getting it out. I like your 

comment on something. It has to do with the fact that even though 

the 1996 Republican welfare reform has been arguably one of the 

most successful social programs in our Nation’s history, as is witnessed by the fact that dependence has fallen by unprecedented 

numbers, caseloads have fallen by 9 million; from 14 million to 5 

million today. Child poverty rates are down sharply. 

Since 1996 more than 2 million children have been lifted from 

poverty, including the black child poverty rate falling to historically 

low levels. 

Even with all of that, as you know, and working with you, we 

still have much that can be done. There is still some 57 percent of 

recipients who are not working or being trained. There are still far 

too many families that are breaking up or not even—or yet not 

forming to begin with. 

Mr. Secretary, if you could tell us, what are the American people, 

and especially the 2 million families still on welfare today, losing 

by our failure? Again this seems to be our problem in the Senate, 

not so much in the House, but failure to pass our legislation improving the 1996 welfare reforms. 

Mr. THOMPSON. Well, first let me thank you for your leadership in this area, Congressman Herger. You were truly the instrumental leader this year, and I thank you and applaud you for what 

you have been able to accomplish. 

You read the statistics, and I think those statistics bear out that 

it is very important for us to pass the reauthorization of the TANF 

law. What we need to do is, we need to give people the opportunity 

to work; the opportunity to get out of poverty. You can’t get out of 

poverty in America without working. It is so important for us to realize that. 

When you look at childhood poverty, you see the reductions since 

the act of 1996 across the board. When you look at the fact that 

29 

even though there was a downturn in the economy last year, welfare caseloads still had a decline. Also in those States that—when 

before, pre-1996, those States that in the past welfare reform, even 

in those States that had better economic conditions and better unemployment, still saw increases in their caseload; whereas States 

that may not have had the best of time economically, that had reformed their welfare system, still saw a reduction in the caseload, 

which would indicate that the TANF law does work, will work, and 

especially for those still remaining. 

It is important for us to recognize that, and it is important for 

us to move forward and get this law passed as soon as possible. 

Mr. HERGER. If you could respond basically, what is it that is 

so needed to help those who still aren’t working, in the new legislation? What is it, in other words, does the new legislation do that 

updates the old legislation to make it even better? 

Mr. THOMPSON. The new legislation continues on the successes 

of the past, but also increases the number of work hours. It also 

increases the number of child support, and it also increases the 

amount of money for child care. All of these things are going to be 

beneficial for those people still remaining on welfare. 

Mr. HERGER. Thank you. 

Chairman THOMAS. Thank the gentleman. The gentleman from 

Michigan wish to inquire? 

Mr. LEVIN. Welcome, Mr. Secretary. Let me just say a few 

things to try to clarify the record. 

Mr. THOMPSON. Okay. 

Mr. LEVIN. I deeply respect you, but some things that have been 

said here and said earlier, I think, just don’t hold water. You 

knew—your actuaries were estimating the cost far higher than 

CBO quite early on, well before we acted on the Medicare bill, 

right? You knew that? 

Mr. THOMPSON. We knew that the assumptions were higher. 

Mr. LEVIN. You knew—you were told the amount was higher? 

Mr. THOMPSON. No. We did not know the final amount because 

the final 2 days changed the direction of the bill. 

Mr. LEVIN. Wait, wait, wait. Before that, your actuaries were 

saying, before the last couple of days, that the amount was higher? 

Mr. THOMPSON. Our preliminary estimates were higher, yes. 

Mr. LEVIN. You passed that on to the White House? Somebody 

did? 

Mr. THOMPSON. Passed it on to—— 

Mr. LEVIN. Someone at the White House knew what your actuaries were saying? 

Mr. THOMPSON. There were individuals in the White House 

that knew that our preliminary estimates were higher. 

Mr. LEVIN. Whatever the reasons. 

Mr. THOMPSON. Yes. 

Mr. LEVIN. The public can’t get into each and every detail right 

now. We acted on the assumption that was given to us and reiterated by the White House; we were talking about a $400 billion bill. 

When the actuaries within your ranks knew that that wasn’t correct, or was not likely correct, or their assumptions meant a higher 

figure, however you want to put that, that is point one. 

Mr. THOMPSON. Can I respond to that, Congressman? 

30 

Mr. LEVIN. Yes, briefly. 

Mr. THOMPSON. Okay. Just like the Balanced Budget Act (P.L. 105–33) in 1997, there was a $50 billion difference between our actuaries and the actuaries in CBO. Congress has to base their figures on legislation based upon CBO, and CBO still said $395 billion. 

Mr. LEVIN. I know, Mr. Secretary, but the world should know 

there was a difference of opinion. The Administration wasn’t bound 

by the CBO figures. There is a credibility gap in this Administration, and the failure to let the world know while we were debating 

this, what the figures were within the possession of the Administration was wrong, was wrong in my judgment. 

Second, I just want to tell you I have read the ad that is on TV, 

and one place it says, can I keep my Medicare just how it is? Now, 

look there is a deep difference of opinion about that, a deep difference. Mr. Stark has led out some of the differences. The taxpayers I represent, they resent your using taxpayer dollars to say 

what you think when others disagree, whatever was in the 1996 

brochure, and we can go back and see. To use millions and millions 

of dollars on a TV ad is wrong, is wrong; and I think maybe you 

know it is wrong. 

Let me just say a word about welfare reform, Mr. Secretary. 

There has been a reference here to the Republican welfare bill, trying to politicize what happened. It was eventually signed by President Clinton, not by President Bush after he vetoed it twice because of inadequacies in day-care and child care. The problem now 

is that there has not been a true bipartisan effort. There wasn’t 

one here in the House, and there is that problem in the Senate. 

That is why it stalled. 

Let me ask you this. Under your plans, 5 years from now, how 

many uninsured do you expect there to be in the United States of 

America? There are now 42, 43 million. Under your plans, what 

can we foresee in the year 5 years from now? 

Mr. THOMPSON. I don’t know. I don’t know if you are going to 

talk about my plan or—— 

Mr. LEVIN. The Administration’s plan. 

Mr. THOMPSON. Administration’s plan. I think you are going to 

be able to in—5 years from now you should be able to cut the uninsured in half. 

Mr. LEVIN. Okay. My time is up. 

Mr. THOMPSON. I would like to be able to respond to a couple 

things. First off, the law requires me to do what I am doing as far 

as outreach. I read the appropriate legislation. The law—— 

Mr. LEVIN. Are TV ads required? 

Mr. THOMPSON. It says that. It also says that R&D proudly 

disseminates information to discount drug-eligible individuals; requires the Secretary to broadly disseminate information to beneficiaries about the coverage options. That is in the law. 

Mr. LEVIN. It requires a TV ad that says one position, when it 

is refuted or disagreed with, huge numbers in this House and in 

the Senate? 

Mr. THOMPSON. I am just telling you that we are doing the 

best job we possibly can, and we put it out in open bids in 1993— 

or in 2003. In regards to the ad, I think the ad is straight on. I 

31 

think it tells the truth. I think it says what it does. You disagree 

with me. 

The second thing I want to point out is that our actuaries did not know until the December 24th the final number of $534 billion. It 

was changed right up until the end. The two biggest changes that 

our actuaries had no information about whatsoever, Congressman 

Levin, were basically the following two. Number one, the conferees 

decided to reduce the size of the doughnut, reduce the discount 

from $275 to $250, and we didn’t know that. It was a difference of 

about $30 billion that was put in by the actuaries in the last 2 

days. The second thing is, our actuary said that if you would take 

the lower three bids that the amount of difference would be at least 

a $30 to $40 billion difference. 

Mr. LEVIN. That is a substantial amount. 

Mr. THOMPSON. Those are a substantial amount. 

Mr. LEVIN. What I am saying is, you actually you knew all 

along—— 

Mr. MCCRERY. [Presiding.] Excuse me. If the gentleman would 

yield, the gentleman’s time has expired. Mr. Secretary, it is always 

a pleasure to have you before our Committee. You do a great job, 

both here and in directing one of the most important departments 

of the Federal Government, so I commend you for that. 

About the advertising, I was glad you pointed out that, in fact, 

the legislation directs the Department to spend, I believe, up to a 

billion dollars in advertising and promoting the new Medicare program. The reason we inserted that into the legislation, to make 

sure that the executive branch advertised and got the word out, is 

very simple. 

This bill that we passed is the most significant change in the 

Medicare program since its inception in 1965. Certainly, I would 

hope all of us would want senior citizens in this country to understand the changes that have been made, what their options are 

going to be and to allow them to take advantage of some of the 

changes in the program that we think will benefit seniors. Otherwise, it will do no good. 

So, while some may object to certain language or to the public 

relations that is being used by the Department, I would hope that 

no one would object to the goal of educating and informing seniors 

as to their options under this changed Medicare program that we 

will have in this country. I am glad that you are doing it. I have 

seen the ads on TV; I think they are excellent. I hope you will continue to develop ads, TV ads, which is probably the most effective 

way to get the word out in the community, get seniors talking 

about it. So, I hope you will continue to do that. 

I want you to address something that has not been talked about 

today, but is talked about back in my district some. Certainly some 

of the opponents of the Medicare legislation have talked about this 

provision in a way that implies that if the provision weren’t in the 

bill, drug prices for seniors would be lower. This is the provision 

which prevents the Federal Government from interfering in drug 

price negotiations between the Medicare drug plans and drug manufacturers. 

To hear some characterize this provision, it would lead one to believe that this was put in there to keep drug prices high. What is 

32 

your comment, Mr. Secretary, about why that provision was in 

there and what its effect is? By the way, before you begin, I should 

point out that this same language was included in a number of 

Medicare drug bills introduced by both Republicans and Democrats 

over the last few years. 

Mr. THOMPSON. The reason is that we do not administer the 

drug programs. There are independent companies that administer 

the programs, who will have the power to negotiate. 

Our Department does not purchase the drugs. We administer the 

program. The pharmacy benefit managers (PBMs), the preferred 

provider organizations (PPOs), the health maintenance organizations (HMOs), those are the individuals that are going to have to 

negotiate with the pharmaceutical companies, and the biological 

companies, in order to reduce the prices. We do not purchase the 

drugs, which is the big difference between us and the U.S. Department of Veterans Affairs. 

The Veterans Department administers the program, but they 

also purchase the drugs and give them to individuals. We don’t do 

that. 

The pharmacist gives the drugs, and the individual HMO or the 

PPO or the PBMs are the ones that give the drugs to the individuals. They are the ones that have to have the power to negotiate 

with the pharmaceutical companies in order to get the lowest price. 

Mr. MCCRERY. Well, I am glad you mentioned the VA system 

because that is a good example of a government not only negotiating for prices, but also establishing formularies for the availability of drugs to veterans. In fact, as a result of the development 

of those formularies, there are a number of drugs that are simply 

not available to veterans, and this language in the bill also bars 

the government from restricting drugs on a plan’s formulary. The 

CBO, in fact, Mr. Secretary, addressed this question specifically 

during the debate on this bill; and CBO said that by not having 

this provision on the bill, it would not reduce drug prices to seniors, in the opinion of CBO. The CBO went on to say, comparing 

this language to the Medicaid program, which has its ‘‘best price’’ 

requirement, if we were to impose upon the new Medicare language 

the ‘‘best price’’ requirement that we have under Medicaid, it would 

increase the bill’s cost over 10 years by $18 billion. 

So, Mr. Secretary, in fact, the language in the bill is there to try 

to provide the lowest prices for drugs to seniors and to allow the 

private sector to do what it does best—compete and negotiate and 

provide services at the lowest cost, the best value. So, thank you, 

Mr. Secretary, for explaining some of that to us. Please keep up 

your good work in the Department. 

Mr. THOMPSON. Thank you, sir. 

Mr. MCCRERY. With that help, I think we will deliver a good 

Medicare program to seniors. Mr. Cardin. 

Mr. CARDIN. Thank you very much, Mr. Chairman. Let me just 

take issue with our Chairman. One knows that market share has 

an awful lot to do with pricing. If we were to negotiate market 

share on behalf of all seniors, it would bring about lower drug costs 

than if we allow it to be parceled out in the different regions of the 

country, relying upon the private PBMs. That is why I think just 

about every consumer advocate group believes that the provision 

33 

prohibiting you from negotiating with the pharmaceutical industry 

will work to the detriment of the American consumers and seniors 

in the prices of their drugs. 

Let me just point out, if I might, I understand the need to educate and inform our seniors about this new law. It is complicated. 

They have to make decisions based upon their current coverage 

and what the anticipated benefits will be. It is important that you 

get information out now about the discount card, and then, as the 

plans become available, the options that our seniors have to enroll 

in those plans. 

I understand Congress putting the education requirement in the 

law. I saw the ad for the first time this morning as I was exercising 

and watching TV, I saw it on network TV in Baltimore, and I 

would urge you to show these ads to independent groups who are 

not politically affiliated. 

I saw the ad, and I thought for sure I was looking at a partisan 

political ad that was trying to convince people that what we did in 

Congress was good, not trying to educate or inform them, which is 

your responsibility. You don’t want your agency to get involved in 

a political battle or in election-year politics; and I would urge you 

to get some independent reviews, because I think you have crossed 

the line on that ad—at least the one that I saw—because I thought 

it was too partisan and too political. 

I want to touch on a couple of issues that are not partisan at this 

point. There is a provision in H.R. 1 that deals with TRICARE for 

90,000 military retirees and spouses, 90,000 of which are caught in 

a situation that when Congress added TRICARE-For-Life for military retirees in 2000, they had the right to enroll in the plan if 

they were in Medicare Part B, but they are faced with late-enrollment penalties in Part B through no fault of their own. 

We have included a provision in the Medicare bill that will allow 

them to enroll in Medicare Part B without penalty, but they need 

to do it by the end of this year. 

You are required to issue regulations so that they can take advantage of the provision that was passed by Congress. This was not 

in the first set of regulations that your agency issued, and I know, 

I really do know that an incredible amount of work has been placed 

on your agency, particularly with regulations that you have to 

issue. Because of the time sensitivity here, I would urge that you 

give this a priority. It is important to our military families and I 

would urge you to get the regulations out as quickly as possible. 

Mr. THOMPSON. Thank you very much, Congressman Cardin. 

Mr. CARDIN. There is a second point I want to bring up. Let me 

just respond very briefly to Mr. Herger. I think you have been 

working with us on the welfare bill. There was a provision that for 

some reason was not included in the bill that would have made 

elimination of poverty a goal within the welfare system. We talked 

about that. I don’t know why we didn’t include it. 

So, perhaps, as you work with the conferees, we can figure out 

a way, assuming the bill moves through the Senate, to correct that, 

because I agree with you that the next plateau for welfare reform 

should be to try to help families get out of poverty. 

I might point out that there was just a GAO report that showed 

20 some States have reduced their child care budgets because of 

34 

the local financial pressures on budgets, and another 10 or 11 are 

looking at cuts in child care. Your budget provides only a billion 

dollars more in the child care budget, not enough to stop the freezing of enrollments in my State. Unless you go on welfare, you can’t 

get any child care help. 

I would hope that we could find additional resources to deal with 

child care needs. If we are going to ask families to get out and 

work, which they should, and we want them to get jobs, and we 

want them to get job training, it is going to require safe and affordable child care. We don’t have enough today, and a billion dollars 

more in mandatory appropriations will not be enough. 

Mr. THOMPSON. Thank you very much, Congressman. Let me 

just respond quickly to a couple of the things. 

In regards to the waiver of the Part B late enrollment penalty 

for certain military retirees, we will do everything we possibly can 

to get it done. I can assure you that we will, and I thank you for 

bringing it up to me. 

In regards to comparing these ads, I was under the impression 

that other people did see them. I will go back, but it is my understanding they did. The lead contractor has been there since 2003. 

It is Ketchum Public Relations, and I believe everybody pretty 

much knows who they are. It was an open contest. They won it. 

As I understand it, Ketchum’s executive is Chuck Doland, who 

happens to be on John Kerry’s finance committee, so I don’t think 

he would be putting something out that is partisan. He is the one 

that is responsible for putting together the team. 

Mr. CARDIN. I don’t want either political party involved in these 

ads. 

Mr. THOMPSON. It was an open bid, and it was peer reviewed, 

and Ketchum won it in 2003. It just happens that the lead person 

happens to be a Democrat, Congressman Cardin. 

Mr. CARDIN. Well, I appreciate your willingness to check, to 

look at it. The one ad I saw, as I said, dealt solely with trying 

to—— 

Mr. THOMPSON. I think you are right. I think they should—I 

want them to be informational. I want to be able to get the information out to the seniors. I don’t want them to be partisan. I want 

them to be able to do the job which the Congress wants us to do 

and to implement this law as fairly as we possibly can. 

Mr. CARDIN. Thank you, Mr. Secretary. Thank you, Mr. Chairman. 

Mr. MCCRERY. Before I call on Mr. Camp for questioning, I 

want to point out in response to Mr. Cardin’s comments about all 

these consumer groups that are now saying that the non-interference language is so bad. It is curious to me that—and I mentioned this generally, but I will be more specific now—that a number of Democrat-sponsored bills contain the same language, and 

those were the Eshoo-Frost bill of 2000, H.R. 4607; the Stark 2000, 

when the Democrats promoted it as an alternative on the floor and 

204 Democrats voted for it; the Wyden 2001, S. 1185; and the 

tripartisan Jeffords-Breaux-Landrieu 2002 in the Senate. So, it is 

just curious to me that somehow now the same language that was 

used on both sides of the aisle in the best interest of seniors is 

being denigrated. Mr. Camp. 

35 

Mr. CAMP. Thank you, Mr. Chairman. I want to thank the Secretary for being here and to thank you for the excellent job you do. 

I just have a quick comment on Mr. Cardin’s comments earlier, 

that in H.R. 4 we did mention and we did add reducing poverty as 

one of the goals of the bill, in Section 401—I have the language 

here; I can share it with you—to try to make it a more bipartisan 

effort. So, I am hopeful that will answer that question. 

I do want to mention about the non-interference language that 

Mr. McCrery brought up, that language is language that has appeared in a number of bills from both parties, really since the 

Daschle Medicare bill of 2000; the Eshoo-Frost bill in 2000; the 

Stark bill in 2000; the Wyden bill in 2001; the tripartisan bill that 

passed or that was introduced in 2002; and also in the Senate 

Medicare bill that passed in June 2003, which 35 Democrat Senators supported, including one of my own Senators from Michigan. 

Really, I think the point is that the government doesn’t negotiate 

prices, the government sets prices; and I think it is very important 

to have this language in there to preserve the competitive privatesector delivery system that we have in this country. That is why, 

I think, you have seen language in bills of both parties consistently 

over the years as we have tried to address this idea of a prescription drug benefit in Medicare that have included this language. So, 

I just wanted to make that point. 

Also, Mr. Secretary, one of the provisions in the budget that 

hasn’t received the most attention today, but I think is one that 

really will help many families make adoption easier is the income 

phase-out on the adoption credit. I just want to commend you for 

that and say that I think that will have a very positive result. 

I just wondered if you had any idea how many families would 

benefit from this proposal, that actually simplifies the adoption tax 

credit and makes it possible for more families adopting children to 

take advantage of it. 

Mr. THOMPSON. I can’t give you a figure at this point in time. 

I am sure that I can go back to the Department and get some of 

our actuaries to give you a number. 

I would like to tell you—first, to thank you for your leadership 

on the adoption bill last fall. It was an excellent one, and it is going 

to turn out to be an excellent bill to improve adoptions, especially 

for special needs children and especially those older children, over 

the age of 8. You led the leadership on it, and I thank you so much. 

Mr. CAMP. Well, thank you very much. Thank you, Mr. Chairman. 

Mr. MCCRERY. Thank you, Mr. Camp, and I add my commendation for all your work on the adoption provisions. Mr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Secretary, I 

know that sometimes things in our personal life are pretty tough 

to deal with, and my heart is with you today. Nevertheless, I want 

to ask a couple of questions. 

Mr. THOMPSON. I know you will. 

Mr. MCDERMOTT. I have to. You once said communities of color 

suffer disproportionately from diabetes, heart disease, Human Immunodeficiency Virus (HIV), AIDS, cancer, stroke, and infant mortality. Eliminating these and other health disparities is a priority 

of HHS. I have always considered you as being someone who was 

36 

among the more credible among the Secretaries in this Administration. 

The recent record of the Administration is so bizarre that it is 

hard to find anybody that believes anymore. What is struggled with 

is that on the day before Christmas Eve, the National Institutes of 

Health (NIH) released its national health care disparities report, or 

it was released from HHS. 

This was in response to a public law which demanded that you 

do this. It was given to the NIH, and they looked at the issue, and 

the investigation found that HHS substantially altered the conclusions of its scientists. In the June draft, the Department scientists 

found significant inequality in health care in the United States, 

called health care disparities ‘‘national problems,’’ and emphasized 

that these disparities are pervasive in our health care system. 

Now, for some reason, you took it upon yourself to rewrite this, 

and you came out with a version that refused to define disparity 

as had been done in the other one. The other one had had 30 references to ‘‘disparity.’’ There were no references to ‘‘disparity,’’ and 

it was left undefined. 

Now, you even went to things like the Native American population in this country where you point out that they have a lower 

death rate from cancer. Well, that sounds like a pretty good deal, 

but what there was no mention of was that their overall life 

expectancies are significantly shorter than all other Americans, or 

their infant mortalities are substantially higher. 

They went on with things like—the draft concluded that the racial and ethnic minorities are more likely to be diagnosed with latestage cancers, die of HIV, receive suboptimal cardiac care. The 

final version dropped all these examples. 

Now, I would like you to tell us who told you to rewrite this, because I can’t believe that the man who made that first quote, that 

first statement about the disparities, could rewrite a report from 

the NIH. 

Mr. THOMPSON. I didn’t rewrite it, and thank you for bringing 

the question up. I would like to clarify that. 

Mr. MCDERMOTT. Yes, please do. 

Mr. THOMPSON. When it came to my desk a couple of weeks 

ago, I changed that order and put out the original report just the 

way it was, without any changes whatsoever. 

Mr. MCDERMOTT. Well, could you explain to me how this happened in the first place? How do you go out and—— 

Mr. THOMPSON. I can explain it to you, but it is not something 

that I am very happy about. Some individuals, that thought they 

were doing the right thing, took it upon themselves to be more 

positive; and when it came to me I said, no, we will put it out the 

way it was. That is the way it is going to be. 

Mr. MCDERMOTT. Well, that is what brought my attention was 

the quote from your spokesperson—— 

Mr. THOMPSON. That is how I feel, and that is how I believe. 

That is why it is going to go out in its original form, Congressman. 

Mr. MCDERMOTT. I am stunned, and I appreciate your honesty. 

Mr. THOMPSON. Well, I am honest. 

Mr. MCDERMOTT. I think—— 

37 

Mr. THOMPSON. There was a mistake made, and it is going to 

be rectified. 

Mr. MCDERMOTT. The disparities in health care in this country 

are atrocious, and I think it shouldn’t be a partisan issue, and I 

think it ought to be—— 

Mr. THOMPSON. It is not a partisan issue. 

Mr. MCDERMOTT. If we don’t admit it, we can’t deal with it. 

Mr. THOMPSON. You are absolutely correct. 

Mr. MCDERMOTT. I think that the other thing that I have been 

concerned about, and that is the whole question of the ads. I looked 

at those ads. Well, I was watching the President on Sunday morning. I admit I got up, went down in my bathrobe to watch him. 

Mr. THOMPSON. I bet you were cheering him on. 

Mr. MCDERMOTT. Yes, I was. I thought it was great. Right in 

the middle I get one of these ads, and I couldn’t believe that you 

would authorize that. All right, we know that you want to sell the 

product and advertising on TV is the way 90 percent of Americans 

find out what is going on; but that campaign really was over the 

top. 

I find—like Pete, I find myself with the National Taxpayers 

Union, and I agree, there must be something wrong. I really think 

you ought to look at that. If you are going to keep putting that out 

there, you are going to pay for it, I think, in the end—not you, but 

politically your party will pay for that. You cannot misrepresent 

the situation in that way and expect to get away with that. 

Mr. THOMPSON. Congressman McDermott, I respectfully disagree with you. I do not think we are misrepresenting it. I think 

we are very straight on. 

I will go back and look at it again, but I am not the one that 

puts these ads together. I don’t have that ability, Congressman. We 

hire people to do it. It is the same firm that has been doing it for 

the last 3 years, and it hasn’t been changed. As I indicated, the 

lead individual that put the thing together happens to be a Democrat, and I don’t think he would put out partisan stuff. 

Mr. MCDERMOTT. Mr. Secretary, just one thing. It sounds like 

on the report from the NIH you were not the one who made the 

decision, and I have the feeling you didn’t make the decision about 

these ads. I think that they were made somewhere else. They were 

never submitted to you. 

Mr. MCCRERY. The gentleman’s time has expired. 

Mr. THOMPSON. They have my final approval. I am responsible. 

Mr. MCCRERY. I thank the gentleman for his comments. I 

would point out to the gentleman from Washington that I agree 

with Secretary Thompson’s decision to issue the report in its original form. As you and I have discussed, there are disparities among 

ethnic and racial groups in this country with the quality of health 

care they receive; and if you and I had perhaps ventured a little 

farther in our efforts to create a system in which everybody would 

have private health insurance, maybe we could solve those problems. Mr. Ramstad. 

Mr. MCDERMOTT. I stand ready to work with you. 

Mr. RAMSTAD. Thank you, Mr. Chair. Mr. Secretary it is always 

good to see my friend from Wisconsin, and I want to thank you for 

38 

doing a tough job very well. I want to shift gears, and I mean really 

shift gears to the recent National Survey on Drug Use and Health. 

I am sure you are familiar with the survey, which showed 6 million 

Americans are drug addicts, 17 million Americans are alcoholics. In 

the same year, according to the Office of Drug Control Policy, same 

year’s survey, 3.5 million people were denied treatment for chemical dependency in America who were ready to take that first step 

and who needed help. That is why I am pleased the President’s 

budget calls for $200 million funding for the access-to-recovery 

State vouchers to give people with chemical dependency access to 

the program that works best for them, a program of treatment 

which will hopefully start them on their recovery. 

Last year, as you know, we funded half of the President’s re- quest. He also requested $200 million in last year’s budget. We 

funded the program at $100 million for this fiscal year, and I am 

hopeful we can work together in a bipartisan way and fully fund 

this program. This is something that is desperately needed to deal 

with the epidemic of chemical addiction in America. 

Last year, I know also, the Administration made a commitment 

to work with Congress to pass mental health treatment parity. In 

fact, the President stated publicly that he supports mental health 

treatment parity. This would include a study of the efficacy of 

chemical dependency treatment parity. 

I would like to know, Mr. Secretary, what, if anything, is currently being done by the Administration to promote mental health 

parity, the bill sponsored by Senator Domenici in the Senate, and 

I have sponsored the companion bill in the House. 

Mr. THOMPSON. Let me just start off by thanking you for your 

leadership in this area, because mental health parity is something 

that this country needs to get to. There is no question about it. 

How we get there, of course, is always the problem because of the 

financial implications. The President has come out strongly for it 

and as a result of that—he doesn’t need to convince me—but my 

whole Department is pushing for it; and hopefully we can get legislation through Congress this year that will accomplish that. 

Mr. RAMSTAD. As it now reads, is the Administration supportive of the Domenici-Ramstad bill? 

Mr. THOMPSON. As of right now, I am certainly supportive of 

the concept. I don’t know if the White House has taken a position 

on that particular bill, the concept the President has come out and 

endorsed. 

Mr. RAMSTAD. I see one of your assistants shaking her head affirmatively, and that is a good sign. I certainly hope so. 

You alluded to the cost implications of parity. Mr. Secretary, as 

I am sure you know, we have all the empirical data in the world. 

This issue has been studied to death for 20 years, both mental 

health treatment parity and chemical dependency treatment parity. 

We can prove—we have proven, rather; it is the RAND Corporation 

study or the Rutgers study or the Columbia University study or the 

Minnesota study or the California study. 

We can go on and on. We can show that for every dollar we 

spend in treating people with depression and other mental health 

problems, for every dollar we spend treating people with chemical 

addiction, we save $7. We save $7. Everybody out there who is unVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 E:\HR\OC\A228A.XXX A228A
39 

treated for their alcoholism incurs health care costs 100 percent 

higher than I do, who has been treated for my alcoholism. 

So, we don’t even have to argue that this is cost effective. It is 

not only the right thing to do, but it is the cost-effective thing to 

do, and I am glad the President supports it. I am glad you support 

it, and I hope this year we can get it done. 

Mr. THOMPSON. Congressman, all I can tell you is that everything you said, you speak from the heart and it is so true. The 

truth of the matter is, this whole country, if we are really serious— 

and I hope on a bipartisan basis we are—if we are really serious 

about getting health care costs under control, you have to start 

looking at prevention. Number one, $155 billion for tobacco, 442,000 Americans die; 

$135 billion on diabetes, 200,000 Americans die; $117 billion on 

obesity, and over 300,000 Americans die; on alcoholism and so on 

down the line. If you really want to address health care costs in 

America, we have to do something about prevention, and that has 

got to be front and center. 

I happen to be passionate about it. I talk about it all over the 

country. 

I am so happy that you are out pushing in regards to alcoholism 

because you know absolutely how important it is and how important it is to get this information and word out. Whatever you can 

do to help me, and whatever I can do to help you, I am there. 

Mr. RAMSTAD. Thank you very much, Mr. Secretary. 

Mr. MCCRERY. Mr. Kleczka. 

Mr. KLECZKA. Mr. Secretary, I have a couple of questions, going 

back to the Medicare program. Do you agree that currently we are 

reimbursing HMOs and PPOs who administer to Medicare patients 

higher than under the Medicare fee-for-service program? 

Mr. THOMPSON. Yes. 

Mr. KLECZKA. Do you know what that percentage might be 

or—— 

Mr. THOMPSON. I think it is 105 percent. 

Mr. KLECZKA. Okay. About 5 percent. I am told that under this 

bill, and especially since the re-estimate of the costs going to insurance companies, that the difference in reimbursement will be about 

120 percent. Do you agree with that? 

Mr. THOMPSON. I disagree with that, Congressman Kleczka. 

Mr. KLECZKA. Under the bill, how high do you think we are 

going to get? 

Mr. THOMPSON. I think it was 106 percent. 

Mr. KLECZKA. No, it is much higher than that. Well, the reason 

I bring this up is—I’m sorry. 

Mr. THOMPSON. Our actuaries say it is going to be 105 to 106 

percent, and they figured it would be about 98 to 99 percent if they 

would take the three bottom bids in the regions; and that is why 

we were advocating it. 

Mr. KLECZKA. The reason I bring that up is because currently 

we are reimbursing insurance companies higher than the Medicare 

fee-for-service, and it seems that one of the reasons we had to pass 

this bill, which I did not support, was because we had to save 

Medicare. Well, how do you save Medicare—save it from going 

bankrupt? How do you save Medicare by going to a system where 

40 

you are paying more for your reimbursement to companies, versus 

the current system? That just doesn’t add up in my mind. 

The other question and concern I had, Mr. Secretary, is in questioning from Mr. Crane from Illinois, you indicated your support of 

the health savings accounts and also your support of the President’s proposal to have the premiums for these high-deductible 

policies totally tax deductible; am I correct? Did I hear right? 

Mr. THOMPSON. I didn’t answer on the premiums. 

Mr. KLECZKA. Okay. Well, it seems that the President is recommending that these types of health care premiums be totally deductible from the income of the individuals. Do you not support the 

current premiums we are paying to also be deductible? I guess that 

was the link I tried to establish here. 

Mr. THOMPSON. I support the budget as advanced by the President, Congressman. 

Mr. KLECZKA. Okay, but it seems ironic that this one type of 

special health care premium is going to be treated more favorably 

than the health care premiums that the balance of Americans pay, 

and I think there is something wacko with that policy, and hopefully this Committee will make it—if, in fact, it is pursued, will 

make it much more fair for all Americans who are paying health 

care premiums. Thank you. 

Mr. THOMPSON. I tend to agree with you, Congressman. 

Mr. MCCRERY. Does the gentleman yield? It seems so. Ms. 

Dunn. 

Ms. DUNN. Thank you very much, Mr. Chairman, and thank 

you, Secretary, for being with us today. We all appreciate your resiliency in working with us to interpret what is a very complicated 

piece of legislation; and I know we will all work together over the 

next few months and years as we make sure that some of the elements that are important to us do not slip through the cracks. We 

appreciate your working with us. 

A lot of us on this Committee are very interested and concerned 

about the 44 million people who remain uninsured, and we are 

looking for a way to provide them access to health care coverage. 

Because of the characteristics of the uninsured—many of them 

work for companies, but they are different size companies—it is 

tough to come up with a single approach to provide their insurance 

coverage. There is interest in refundable tax credits, not just for individuals but also for small companies, and I am wondering—you 

have taken a shot at this from different angles. 

Could you just summarize some of the thoughts you have to help 

us provide for affordable health care coverage? 

Mr. THOMPSON. Thank you for the question. There are several 

things I think we should do. 

The first thing, I think we should try and move a lot faster toward a more uniform system as far as a computerized system for 

practicing medicine. We could reduce the number of untimely 

deaths and accidents considerably. We are in the process of doing 

that in the Department, setting up a uniform system called 

SNOMED, which we are going to license and give out to clinics and 

doctors. 

I think we should take the President’s plan on tax credits. I 

think we should then expand that and allow States to set up for 

41 

all those that are uninsured into a purchasing pool—it would be a 

very good pool—and have the State set up an insurance commission or commissioner that would negotiate for that particular tax 

credit for the State of Washington. 

The State of Washington may have 2 percent of the total tax 

credit. If they got that into an uninsurable pool and had one individual to do it, you would have a lot of companies that would bid 

for the individuals that are uninsured, and then you would have 

a very acceptable rate for the uninsured to purchase it. The third thing is, you could have a stopgap loss at over $7,500 

in insurance policy from 75 to 25 percent and would be affordable, 

and it would be able to reduce the number of uninsured considerably. 

The next thing you should do is you should try and do something 

about the Community Health Centers to be able to make sure that 

we are able to get more Community Health Centers across America. If you do those three things, you can reduce the uninsured and 

allow a lot of access to individuals that need health insurance in 

America. 

Ms. DUNN. Thank you very much. The second question—— 

Mr. THOMPSON. The final thing is, if we are ever going to get 

control of this, we have to be serious about prevention. 

Ms. DUNN. Yes, and we have discussed that on this panel. Let 

me ask you a question about reimportation. As part of the Medicare Prescription Drug Act, Congress directed several departments 

to work together and to conduct reports on reimportation, and I am 

wondering—there were some guidelines that were proposed in the 

legislation. I am wondering how that reporting is coming. What efforts has your Department taken to deal with counterfeit drugs 

that are entering the United States? 

Mr. THOMPSON. Well, the U.S. Food and Drug Administration 

(FDA) has taken a leadership role, Congresswoman Dunn, and they 

have had a couple of incidents in which they have stopped drugs 

coming into America in order to find out what kind of drugs are 

coming into America and how many are counterfeit drugs and how 

many are mislabeled and so on. The percentage is very high. 

I can get those facts and figures for you. I don’t have them off 

the top of my head, but it is basically in the area of 75 to 80 percent of the drugs that were stopped by FDA agents coming into 

America were either mislabeled or counterfeit drugs or were the 

wrong type of drugs, or the directions on the packaging. 

[The information follows:] 

The task force has been convened and held its first meeting with consumer groups 

on March 19th. The task force is chaired by Dr. Carmona, the Surgeon General. See 

the attached press release for additional information on the task force, its members 

and its agenda. 

FOR IMMEDIATE RELEASE Contact: HHS Press Office 

Tuesday, March 16, 2004 (202) 690-6343 

HHS Names Members to Task Force on Drug Importation 

HHS Secretary Tommy G. Thompson today named 13 people to serve on the new 

Task Force on Drug Importation that is exploring how drug importation might be 

42 

conducted safely and its potential impact on the health of American patients, medical costs and the development of new medicines. 

Surgeon General Richard H. Carmona will serve as the task force’s chairman. The 

panel includes representatives from across HHS, as well as from other parts of the 

federal government with knowledge or involvement in drug importation issues. The 

task force may consult other federal officials as well. 

‘‘Under Dr. Carmona’s leadership, this task force will fully examine the issues 

surrounding drug importation to determine how to assure consumers that such imported drugs are safe and effective,’’ Secretary Thompson said. ‘‘We haven’t been 

able to provide those safety assurances as required by law and with available resources. The task force will study if drugs can be imported safely and, if so, what 

resources would be needed to ensure safety.’’ 

Secretary Thompson also announced the dates for the task force’s five listening 

sessions with groups and individuals who would be affected by drug importation. 

The first meeting will take place Friday, March 19, and will feature speakers from 

at least a dozen invited consumer groups. 

The dates of the other listening sessions are: April 2 with health care purchasers; 

April 28 with professional health care providers; May 6 with industry representatives; and May 14 with international stakeholders. 

In addition, the task force will hold a public hearing on April 14 to allow members 

of the general public to present their views on the issue. The hearing will take place 

in the Natcher Auditorium at HHS’ National Institutes of Health in Bethesda, Md. 

Information about participating in the public hearing is available at http://www. 

fda.gov/OHRMS/DOCKETS/98fr/04n-0115-nm00001.pdf. 

‘‘Secretary Thompson asked the task force to assess the issue of drug importation 

safety and the associated public health issues,’’ Dr. Carmona said. ‘‘I am looking forward to working with task force members as we conduct a fair and objective evaluation based on the best science and information available.’’ 

In addition to Dr. Carmona, the task force members are: 

• Jayson P. Ahern, assistant commissioner in the Office of Field Operations, U.S. 

Customs and Border Protection, Department of Homeland Security. 

• Alex M. Azar II, HHS general counsel; 

• Josefina Carbonell, HHS assistant secretary for aging; 

• Lester M. Crawford, D.V.M., Ph.D., FDA deputy commissioner; 

• Elizabeth M. Duke, Ph.D., administrator of HHS’ Health Resources Services Administration; 

• Mark B. McClellan, M.D., Ph.D., incoming administrator for HHS’ Centers for 

Medicare & Medicaid Services; 

• Mike O’Grady, HHS’ assistant secretary for planning and evaluation; 

• William Raub, HHS’ deputy assistant secretary for public health emergency 

preparedness; 

• Tom Reilly, public health branch chief at the White House Office of Management and Budget; 

• Amit K. Sachdev, acting FDA deputy commissioner for policy; 

• Elizabeth A. Willis, chief of the Drug Operations section, Office of Diversion 

Control, U.S. Drug Enforcement Administration; and 

• Colette Winston, a trial attorney at the Department of Justice. 

The task force’s members ultimately will offer recommendations to Secretary 

Thompson on how best to address the key questions posed by Congress as part of 

the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The 

legislation directed HHS to complete a study by December 2004 to address the following issues related to drug importation: 

• Identify the limitations, including limitations in resources and in current legal 

authorities, that may inhibit the Secretary’s ability to certify the safety of imported drugs. 

• Assess the pharmaceutical distribution chain and the need for, and feasibility 

of, modifications in order to assure the safety of imported products. 

• Analyze whether anti-counterfeiting technologies could improve the safety of 

products in the domestic market as well as those products that may be imported. 

• Estimate the costs borne by entities within the distribution chain to utilize such 

anti-counterfeiting technologies. 

• Assess the scope, volume and safety of unapproved drugs, including controlled 

substances, entering the United States via mail shipment. 

• Determine the extent to which foreign health agencies are willing and able to 

ensure the safety of drugs being exported from their countries to the U.S. 

43 

• Assess the potential short- and long-term impacts on drug prices and prices for 

consumers associated with importing drugs from Canada and other countries. 

• Assess the impact on drug research and development, and the associated impact 

on consumers and patients, if importation were permitted. 

• Estimate agency resources, including additional field personnel, needed to adequately inspect the current amount of pharmaceuticals entering the country. 

• Identify the liability protections, if any, that should be in place if importation 

is permitted for entities within the pharmaceutical distribution chain. 

• Identify ways in which importation could violate U.S. and international intellectual property rights and describe the additional legal protections and agency resources that would be needed to protect those rights. 

A public docket for the task force will be opened tomorrow to allow members of 

the public to submit comments for the record. The docket, 2004N–0115, will be 

available at 

http://www.accessdata.fda.gov/scripts

f 

/oc/dockets/comments/commentdocket.cfm. 

Ms. DUNN. Is it your feeling that people incur a great danger 

when it comes to safety if they go across the borders to purchase 

drugs? 

Mr. THOMPSON. I can’t say that, Congresswoman Dunn. I am 

just talking about drugs that were—that we stopped coming into 

this country at the border. I don’t know—safety of people going 

across the border, we haven’t stopped anybody going across the border, and I don’t think we are—there is no intention ever to do so. 

Ms. DUNN. Those drugs that you inspect, is that a particular 

type of drug or are you just randomly inspecting? 

Mr. THOMPSON. Random drugs, Congresswoman. 

Ms. DUNN. Thank you. Thank you, Mr. Chairman. 

Mr. MCCRERY. Thank you, Ms. Dunn. Mr.—— 

Mr. THOMPSON. Congresswoman, just if I could, there was a 3- 

day blitz at four airports last year. The FDA identified more than 

1,100 unapproved drugs coming in from Canada and many drugs 

that because of labeling storage or other problems presented safety 

risks. 

Mr. MCCRERY. Mr. Lewis. 

Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman. Mr. Secretary, welcome. 

Mr. THOMPSON. Thank you, Congressman. 

Mr. LEWIS OF GEORGIA. It is good to see you. I want to raise 

one or two questions. One on the line that Mr. McDermott—we 

have all these reports, we have all these studies, and you come 

here every year and we hear all this debate and concerns about the 

health disparity between the majority population and the minority 

population. 

Do you have any information, any data, that would demonstrate 

that we are making some progress? Is the gap continuing to grow 

and widen? Are we narrowing the gap between the minority and 

the majority population when it comes to basic health care? 

In addition, I would like for you to tell me what is your vision 

or what is the vision of this Administration in improving the quality of health care for all of our citizens? 

Mr. THOMPSON. Well, Congressman, my vision is very simple. 

I want to make sure that we have uniform access to every man, 

woman, and child that has a medical problem to be able to get access to that medical care, whatever his race or background may be. 

44 

I believe very strongly that we have set up an institute at the 

NIH that is working extremely hard in order to reduce the disparities across America. We are doing lots of research. A lot of research 

is being done on minority health at NIH and the Centers for Disease Control to make sure that we are much better prepared in 

order to treat minority diseases. 

As you know, I just took over the chairmanship of the world global fund to fight international AIDS. I just came back from Africa, 

where I spent 10 days in five different countries in Africa, talking 

to individuals on how we might be able to implement our programs 

better from the global fund to fight AIDS. 

We are expanding the Ryan White program in this budget in 

order to fight AIDS, especially in minority communities, where we 

are still seeing a spike-up; and I am very much in opposition to 

that and hoping that we are going to be able to get a handle on 

that and get the information out there to minorities in order to protect themselves. 

I have teamed up with Tom Joyner, as you probably know, every 

September to take a loved one to a doctor and especially African 

Americans. We are putting out our literature and our information 

on Medicare, as well as most of our health statistics and health 

documents, Congressman Lewis, in English as well as Spanish, so 

that Hispanics are able to get the same kind of information as possible. 

I speak on this subject across the country to many different minority groups. We are reaching out. Whether or not we are having 

the effect—I think we are. I think we are very aggressive. My Deputy Secretary is doing a wonderful job in regards to this issue; I 

have assigned it to him because he certainly knows this issue as 

well as anybody does, and we are trying to look for any kind of 

input from you or anybody else on how we can do the job better. 

We can always do a job better. We are always looking for ways 

to do it better, and we will continue to do so as long as I am Secretary. 

Mr. LEWIS OF GEORGIA. I appreciate that very much, Mr. Secretary. 

Let me just ask you a question about the new Medicare prescription drug bill. In your heart of hearts, do you really believe that 

this bill is a good deal, a better deal for the poorest of the poor? 

It seems like in some cases, in many of the States, people are going 

to have to pay more. In the State of Georgia—— 

Mr. THOMPSON. Congressman Lewis, this is a very good bill for 

the poorest of the poor. Those individuals under 100 percent of poverty are going to be able to get all of their drugs paid for for free. 

There will be no deductible. They will have no co-pays whatsoever. 

Mr. LEWIS OF GEORGIA. It appears to me in the State of Georgia about 129,000 of the poorest beneficiaries are going to have to 

pay more. I think this would be true in several other States. 

Mr. THOMPSON. No. Those under 150 percent of poverty, 97 

percent of those individuals under 100 percent of poverty are going 

to have all their drugs paid for. Those under—between 100 and 135 

percent, 91 percent are going to have it paid for; those between 135 

and 155, 75 percent. It is a wonderful bill for those low-income senVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 E:\HR\OC\A228A.XXX A228A
45 

iors in America that have had to make a choice between purchasing this or purchasing drugs. 

Mr. LEWIS OF GEORGIA. Well, I appreciate your response. Let 

me just—before my time runs out let me ask you about something 

else. Now, on the morning that we voted on this bill—— 

Mr. THOMPSON. Yes. 

Mr. LEWIS OF GEORGIA. Between 3:00 a.m. and 6:00 a.m., my 

eyes didn’t fool me; didn’t I see you on the floor of the House? 

Mr. THOMPSON. Yes, you did. 

Mr. LEWIS OF GEORGIA. Yes. Do you think it was proper and 

appropriate for a member of the Cabinet to be going from chair to 

chair, aisle to aisle, lobbying Members of Congress to vote on the 

bill? Do you think that was proper? Did you promise anyone anything? 

Mr. THOMPSON. I didn’t promise anybody anything. 

Mr. LEWIS OF GEORGIA. Well, what were you doing there? 

Technically, you could be there, but to me it seemed like it is—you 

are coming down. Seems like it is belittling the Secretary of HHS 

or a member of the Cabinet to be going person to person, almost 

knocking on doors, almost asking for votes. That didn’t look good. 

Mr. THOMPSON. Congressman Lewis, I spent 5 months working 

on this particular bill. I think it is a very good bill. It is very good 

for low-income Americans. I think it was only proper for me to be 

on the floor. Nobody told me I shouldn’t be there. 

I wanted to see it passed. I worked very hard to get it passed. 

I believe it is the right thing, and I think in years to come people 

are going to look back and say this is a very good bill. 

Mr. LEWIS OF GEORGIA. I thank you, Mr. Secretary. Thank 

you, Mr. Chairman. 

Mr. MCCRERY. Thank you, Mr. Lewis. Certainly, if there was 

anyone in the Administration who could have been considered an 

expert on the legislation that was before the House at the time, it 

was the Secretary of HHS. Mr. Collins. 

Mr. COLLINS. Thank you, Mr. Chairman. I concur with that, 

Mr. Secretary. I have heard several of the comments you were 

making there and you were just explaining the provisions of the 

bill to encourage those who may not have fully decided what to do 

on that bill. 

I was pleased to hear you make some comments about the Community Health Centers. We have one down in the Columbus, Georgia, area, which is in south Columbus with a lot of minority residents; and it has done a very good job for the local residents there. 

We appreciate your help in that area. 

In the last few days, as I have traveled through the district and 

have spoken with many oncologists on the phone about the cancer 

drugs, they are concerned about the delivery of those drugs, based 

on the way the reimbursement now will be on the average wholesale price (AWP). They are concerned that those who have more 

clout in buying will be able to buy at a much lower rate than the 

physicians who actually administer in their offices, and that that 

is going to put an imposition that many of them will have to then 

send their patients to the hospital for this type service. I am not 

sure how that reimbursement will stack up with the hospitals getVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 E:\HR\OC\A228A.XXX A228A
46 

ting other benefits because of the visits and how the comparison 

will be on what it actually costs through the Medicare system. 

What do you see in 2005 is some information that we can share 

with the oncologists as to how this is going to be addressed? What 

approach we are going to take to make sure that people are not 

forced into a hospital that may be miles away from where they normally have been going for their care, because of the way that was 

configured in the Medicare bill? 

What can you give us to be able to pass along to these oncologists 

that their patients will be well taken care of and that they will be 

reimbursed at a fair rate to administer the drug? 

Mr. THOMPSON. Thank you very much, Congressman Collins. 

First off, thank you so much for your leadership on Community 

Health Centers. Your Community Health Center in Columbus, 

Georgia, is one of the finest in the country, and I intend to get 

down and visit it with you, hopefully this summer or this coming 

fall. 

In regards to oncologists and the drugs, this was one of the very 

complex and complicated pieces of the legislation; and what we 

were doing, we were overpaying for the drugs in the past and 

underpaying for the delivery of the drugs by the doctors. What we 

are trying to do is to increase the amount of money that doctors 

would receive for giving the drugs and put the payment for the 

drugs more in line. 

As you know, it is going to be AWP, but then it is going to be 

the average sale price in 2005. 

We are setting up the procedures, and we are looking at that; it 

is a very complex thing. We are having a lot of input from the cancer doctors and clinicians across the country. We are having a lot 

of input from individuals like yourself on both sides of the aisle, 

and we will continue to do so, and I will keep you informed as we 

go along. 

All I can tell you is, we are trying to be fair. We are trying to 

put it more in line with what the costs of the drugs are, for the 

proper reimbursement as well as improving the reimbursement for 

doctors so that they can get paid for their services in a more equitable fashion; and they haven’t been in the past. 

Mr. COLLINS. Well, I sure hope so. We were speaking with one 

earlier this morning, and this particular doctor referred to a particular drug that he uses that has a cost, and he used the number 

of $2,100. Based on the reimbursement fee, he would actually get 

80 percent of $1,800 or somewhere around $1,500 with a net loss 

of $600. I don’t know if the fee for the administering is going to 

offset such a difference in cost there of the drug itself. 

So, that is the thing that we are running into, and we are hearing a lot about, and I hope you will keep a very open mind. 

Mr. THOMPSON. It is a real balancing act, and we are looking 

at this. We are trying to come up with the best balance possible. 

We know that there is a lot of criticism out there, and we are trying to find ways in which we can come up with a more equitable 

system, Congressman Collins. The best I can tell you is that we are 

working on it and we will keep you informed. 

Mr. COLLINS. Very good. Very good. Well, that’s all we can ask. 

We appreciate it very much, and please stay abreast of it. We do 

47 

look forward to your visit in the Columbus area for the Community 

Health Center there, maybe sometime in August or early fall. 

Mr. THOMPSON. Thank you very much, Congressman. 

Mr. COLLINS. Thank you. 

Mr. MCCRERY. Mr. Becerra. 

Mr. BECERRA. Thank you, Mr. Chairman, and thank you for 

rolling those Rs so well. Mr. Secretary, pleasure to see you again. 

Thank you very much for your testimony. I want to say what I said 

to you right before we began as well. Thank you very much for the 

work that you have done that many Members of Congress on a bipartisan basis have done to try to deal with the issue of diabetes. 

I think we recognize that it has become a crisis, and it is something that is preventable. 

So, I want to thank you for working hard on the part of the Administration to include within the recent Medicare bill some provisions which I think were instrumental in helping many people who 

are either suffering from or could get better or perhaps control it 

and live a longer life. So, I want to thank you for that. 

I want to get into the advertising issue a bit, because I think 

that goes into the—goes to the question of credibility. I think when 

it comes to seniors, they depend on us to give them the truth and 

explain to them exactly what we are going to do. So, I know that 

questions have been asked by some of the Members to you directly, 

and I know that taxpayers would like to know how the $23 million 

for the advertising campaign is going to be spent. 

Is the information that Members have requested with regard to 

how the money is being used, what programs are being sent out, 

where, whether, is all that information about the advertising campaign going to be provided to the Members? 

Mr. THOMPSON. Absolutely. 

Mr. BECERRA. Okay. Any idea when we will get that? 

Mr. THOMPSON. We can get it to you tomorrow. 

[The information follows:] 

By statute, CMS is required to provide education to beneficiaries. CMS specifically 

chose to include television advertising in our campaign because our research has 

shown that Medicare beneficiaries receive the majority of their information from television, making it the most effective and efficient medium for reaching the Medicare 

audience. 

On February 3, 2004 CMS launched a nationwide advertising campaign, ‘‘The 

Right Answer,’’ to alert beneficiaries of the new benefits that are available under 

the Medicare Prescription Drug Improvement and Modernization Act of 2003 

(MMA). This included newspaper print, radio, and television ads in both English 

and Spanish which direct beneficiaries to the Internet site, www.medicare.gov, and 

the toll-free number anyone can call at 1–800–MEDICARE. The toll-free number 

has customer service representatives 24 hours a day, seven days a week. Due to the 

controversy surrounding this very issue, the GAO conducted an analysis on whether 

our ads were political advertisements. While I did not believe these ads to be politically charged, I had agreed to pull the ad if the GAO’s findings determined that it 

was indeed ‘‘a political advertisement.’’ I am happy that GAO did not find this to 

be the case. 

The ad was developed by our contractors and directs those interested in finding 

out more information about the new benefits to the toll-free 1–800–MEDICARE 

number or Medicare web site. The cost of the winter ad campaign was $12.6 million, 

the cost of the television ad buy which was part of that campaign was $9.5 million, 

and the cost of the beneficiary mailing that includes the Secretary’s letter and MMA 

fact sheet was $10 million. 

f 

48 

Mr. BECERRA. Great. Appreciate that very much. 

Mr. THOMPSON. It is more than $23 million. There is a total 

of $1 billion that the Congress put in the Medicare Modernization 

Act, Congressman, for the implementation, for the information and 

for putting together this very complex piece of legislation. We are 

going to have to purchase some new software. We have some software that is older than the technicians that are administering it. 

Mr. BECERRA. I think there you are going to find that all of us, 

on a bipartisan basis, are going to be asking you to move as quickly 

as you can to get us into the modern age to communicate and provide information. I think what many of us are expressing is that 

some of these advertisements that we have seen don’t seem to give 

much information, other than perhaps sell the program that 

passed, which many of us had a great deal of concern about, especially because most of the provisions of the bill don’t take effect 

until 2006. 

So, to spend what I thought was a campaign so far of about $23 

million in taxpayer funds for an advertising campaign for a program that really won’t start for another year and a half or so, when 

most of the folks that are hearing this for the first time will have 

forgotten, it just seems misplaced. I think a number of us are concerned that it is not really going to have the effect that you want 

to try to educate the public and, certainly, seniors. 

Mr. THOMPSON. We have to get the information out about the 

card. The card is going to be rolled out in May, in June of this year, 

so—— 

Mr. BECERRA. I am looking at this, a full-page advertisement, 

and I see only one brief mention of the card. So, if it is about the 

card, there is a full page that could have been used to give seniors 

a big—— 

Mr. THOMPSON. As I said, we can’t wait until next year. We 

have got to get moving right now. 

Mr. BECERRA. Well, again, that is where I think a number of 

us think if it is really to get the information out about the card, 

the discount card, then let’s have something that really does give 

information about the discount card, not just touts the bill that 

passed. 

Nothing really says here that most of these provisions won’t take 

effect until 2006. So, I think some seniors who look at this are 

going to be somewhat deceived, believing that they can just call 

this 1–800 number and find out how quick—for tomorrow, how 

they can enroll. 

I don’t think anyone wants to do that. That is why I think there 

is some—much caution being raised by some of us on the issue, as 

I mentioned before, with regard to this advertising or just the general issue of credibility, I think at this stage. 

Now we are starting to hear that we went to war in Iraq, and 

it wasn’t for the reasons that the President articulated. We find 

that the Supreme Court is taking on a case right now where the 

Vice President of the United States has been unwilling to reveal 

discussions he had with energy executives about energy policy that 

was going to set the policies for this country for years to come. We 

found that we had an energy crisis that followed and certainly, my 

State, it hit hard. That energy crisis follows many of those discusVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00052 Fmt 6633 Sfmt 6602 E:\HR\OC\A228A.XXX A228A
49 

sions that took place in the White House between Vice President 

Cheney and some of these energy executives, which included people 

from Enron and other companies. 

I think people want us to be credible. It seems difficult sometimes to fault the American people if they think that we are not 

being credible or that the country is heading in the wrong direction. 

We don’t see how we are trying to tackle the fact that we have 

lost more than 2 million jobs over the last 3 years. We don’t see 

what we are doing to try to help the 44 million Americans, most 

of them living in a working household, that don’t have health insurance. 

I am wondering if you can give us a sense of what we are going 

to do today for the 44 million people, for example, who are uninsured, and the close to what is 80 million people who, at some 

point this year, will not have any health insurance and trying to 

tackle their dilemma of providing health care to their children and 

their families. 

Mr. THOMPSON. I mentioned it to Congresswoman Dunn when 

she asked the question. I think what we need to do is we need to 

build upon the President’s tax credit provision that is in front of 

you in this budget, the tax credits of about $75 billion. 

What I would like to do is have each State be assigned a portion 

of that tax credit, have the governors put all those uninsured in a 

particular State into a purchasing pool, allow this governor to set 

up a commission or a commissioner to negotiate with the insurance 

companies. It would be a very viable pool because one-third of 

those individuals are under the age of 25. A good share of those 

are making over $50,000 and just don’t believe in purchasing 

health insurance. So, you have got an insurable risk. You have got 

some that are going to be very difficult to insure, but if you put 

them all together, you are going to have a good risk pool, and you 

get the companies to bid on that. Then you would have a stopgap 

loss, and then you would be able to put out a bid for those individuals and you should be able to get a lot of individuals that you 

could get covered with health insurance. 

Mr. BECERRA. If those tax credits that you are talking about 

max out at $3,000 and the average premium for a family is over 

$9,000, how are we going to make the—— 

Mr. THOMPSON. You didn’t listen to me. I say you put all these 

people into a pool. Then it would not be $9,000 for an individual. 

The insurance companies committed bid for that whole pool, and it 

would be very low. Then you would be able to have individuals subscribe, an individual and a couple. 

Mr. BECERRA. So, that is going to begin to happen this year? 

Mr. THOMPSON. Well, that depends upon you. If I can get bipartisan support, we can get it passed. I have got the plan laid out. 

I can lay out a plan here that we can do it. All I have got to have 

is enough support in Congress to get it passed. 

Mr. BECERRA. You are already over budget $140 billion on 

what you have told us the Medicare bill cost. 

Mr. THOMPSON. No, CBO is still $395 billion. 

Mr. BECERRA. Mr. Chairman, thank you very much. 

Mr. MCCRERY. Thank you. Mr. English. 

50 

Mr. ENGLISH. Thank you, Mr. Secretary. Perhaps to change the 

tone a little bit, I would like to, first of all, thank you for a number 

of the commitments you have made, including taking the time to 

be on the floor of the House of Representatives when we debated 

that very difficult Medicare bill, one that I think required your expertise to be there to explain to Members if they had questions. I, 

for one, find it a little unusual and have a taste I will leave others 

free to qualify, that anyone would criticize you for doing that. 

Second of all, I would like to congratulate the Department for 

launching the advertising campaign that, in the Medicare language, was specifically laid out as one of your responsibilities. I 

think it is critical at this point, given all of the conflicting stories 

that seniors have seen about this Medicare program and this Medicare benefit and the card that is going to be available soon, that 

they have access to objective information. That is all that you are 

providing and I have seen the ad. It gives a number that people 

can call. I think it is entirely appropriate as a use of public dollars 

that we reach out to seniors and make them aware of what their 

options are now, and what is going to be available to them in the 

future. 

So, I want to salute you for doing that. Again, it may be that 

some who voted against the legislation or some of the interest 

groups that opposed the bill may be on record opposing the advertising, but I don’t see what any legitimate concern would be in 

making the information available. 

On another matter, Mr. Secretary, as you know, the law provides 

for an update to hospital wage indices at given intervals. One such 

update occurs after the decennial census numbers are tabulated 

and implemented. Given that 2000 census hasn’t been completed, 

but the wage indices have not yet been updated as a result of this 

census, I wonder, first of all, if you could explain the process in 

which HHS must undergo to complete this decennial update to 

wage indices; and second of all, what is a typical timeframe for 

completing this process, and have there been any circumstances 

this year that could have possibly extended the time necessary to 

complete the decennial update? 

Mr. THOMPSON. We are still analyzing. It is still in CMS. We 

are going to be using the census data, and all I can tell you is that 

we will keep you informed, Congressman. Thank you for your kind 

words. 

Mr. ENGLISH. Well, I am very grateful to you for indicating that 

you will keep us informed. I wonder in your opinion, Mr. Secretary, 

do you feel Congress could exercise its authority properly in order 

to streamline this process for future decennial censuses? 

Mr. THOMPSON. Absolutely. We can give you some recommendations. 

Mr. ENGLISH. I look forward to those. As you know, for example, in Mercer County Pennsylvania, a number of our local hospitals, which are now included in the new Standard Metropolitan 

Statistical Area with Youngstown, have not yet received the higher 

reimbursement that that status would imply. That, in turn, affects 

the quality of health care and services to seniors in that area. I 

know this is not a unique situation, but it is certainly very close 

to home for us. Mr. Secretary, anything you can do to make that 

51 

process move forward and expedited we would be eternally grateful 

to you. 

Mr. THOMPSON. Thank you very much. 

Mr. ENGLISH. I guess my final question has to do with the 

question of homelessness. Recently, one of our local TV stations in 

Erie has focused on the real problems that local providers have run 

into with primarily State funding for homeless programs. 

I notice that the President has offered a new initiative in this 

area called the Samaritan Initiative. I wonder if you could comment on how the Samaritan Initiative potentially could plug some 

homes in the safety net? 

Mr. THOMPSON. The funds are going to be awarded competitively to support the most promising collaborative strategies, such 

as the one that was publicized on your Erie TV station. It is to provide chronically homeless people with permanent housing in support of services. My Department is very involved in setting up supportive services, and we have some plans for them to do that much 

more uniformly across America than has ever been done before. 

Mr. ENGLISH. If I can. I want to also offer to work with you in 

this process. 

Mr. THOMPSON. Please. 

Mr. ENGLISH. As you navigate this initiative through the very 

tight budget this year, we think homelessness is a very serious 

issue. The real problem, including in some of our mid-sized communities in America, and we do think that there is a compassionate, 

conservative way of getting at the core of this problem. I salute you 

for being a leader on that point. 

Mr. THOMPSON. Thank you very much. I am Chairman of the 

Intergovernmental Task Force on Homelessness. We are coming up 

with a report, I believe in August or September on it. I will keep 

you informed. 

Mr. ENGLISH. Thank you, Mr. Secretary. 

Mr. MCCRERY. Mr. Pomeroy. 

Mr. POMEROY. Thank you, Mr. Chairman. Mr. Secretary, it is 

good to see you again, and I want to thank you for working with 

my office and Senator Conrad’s office in getting clarification of the 

wage index issue, straightened out in the wake of the passage of 

the Medicare bill. 

The record you have established in your own public service as a 

well respected Governor, is that the initiatives you brought online, 

you paid for them. One of the things that concerns me about the 

Medicare package, which I supported, is how we sustain the benefits in light of a deteriorating, in my view, an alarmingly deteriorating fiscal situation in the United States. 

Does it concern you, in light of the record deficits and the aging 

of the population, the baby boomers set to retire next decade, that 

there might not be the fiscal wherewithal under this path to continue these benefits? 

Mr. THOMPSON. It concerns me because I am a member of the 

trustees for Social Security and Medicare. As Mr. Chairman pointed out, the trustees meet in March. After the March meeting, I believe he is going to have the actuaries from both CBO and from 

CMS come here to testify together. 

52 

Yes, it concerns me a great deal. Last year at our trustees meeting, Congressman Pomeroy, we had a pretty vigorous discussion 

amongst the trustees about the direction of Medicare and Social Security. At that time we projected out that there was going to have 

some real serious problems come 2014 and 2012. With added benefits there is going to be an acceleration of that. 

There is a provision in the Medicare law that says that once 

Medicare—once Medicare starts taking 45 percent of the gross domestic project budget, say about 33 percent now, goes to 45 percent, the trustees have got to project out when it is going to hit 

that. 

Then it has got to back off 7 years from that. So, if it is going 

to be 2016, the year 2016, which is what the conferees had suggested was possibly the date, the drop-dead date for doing some action by the trustees would be fiscal year 2009. So, there is a trigger 

in there to start alerting Congress, the President, and the administrators about the time to start addressing Medicare about the cost 

and about ways to fund it. 

Mr. POMEROY. Is it your position that as we consider revenue 

items in this Congress that might have a very significant revenue 

impact in terms of revenue lost next decade that this might be 

something we have on our minds already? 

Mr. THOMPSON. I think you always have got to consider the 

revenues. You have also got to consider the tax cuts, how they 

stimulate the economy and how the economy is going to hopefully 

continue to grow and create jobs and be able to bring more money 

into the coffers. 

It is always, I believe, the best hope for a country and an economy is to keep it growing and expanding so that there is more revenue coming in. I think that has got to be the basis under which 

we operate. 

Mr. POMEROY. You are not suggesting that we look at only the 

short-term stimulus effect and ignore the long-term? 

Mr. THOMPSON. I happen to be one of the long-term believers, 

especially in my role as fiduciary responsibility as trustee, Congressman. 

Mr. POMEROY. The final area of inquiry I would have, Mr. Secretary, gets to some funding of designated programs very important 

to rural health care. One of the reasons I believe the Medicare bill 

passed was because it at last addressed funding inequities to rural 

hospitals. 

Mr. THOMPSON. This was an excellent bill for rural America. 

Mr. POMEROY. It absolutely was. I agree with you on that, was 

pleased to co-author the amendment that improved it in that respect that we passed in the Committee on Ways and Means. 

The cuts in rural health outreach network development grant 

programs, the rural hospital flexibility grant programs, and the 

small hospital improvement programs collectively go from $94.6 

million to the recommendations if the budget of $11 million, that 

is especially to phase out the third program. Two of the three are 

zeroed out, the third is phased out. That is a real setback to rural 

medicine. It looks to me a bit like on the one hand, we address the 

issue, on the other hand you make the issue a bit worse with these 

types of cuts to programs vital to rural hospitals. 

53 

Mr. THOMPSON. I understand, Congressman. You have got to 

realize that I come from a very rural area of the State of Wisconsin, and I am a champion of rural health from my legislative 

days through governorship to when I was Secretary. 

When you compare, there has to be some reductions in all of the 

programs in order to get us within the 1.5 percent limit under 

which OMB gave us. When you compare the huge increase at $25 

billion and a loss of $30 million, the overall huge increases in reimbursements for rural hospitals is going to just dwarf the reductions 

that were made on the discretionary side. 

Mr. POMEROY. My time has expired. I have got some issues to 

take with that, but not this go-around. Thank you, Mr. Secretary. 

Mr. MCCRERY. I thank the gentleman for staying within his 5 

minutes time. 

Mr. HULSHOF. I am sorry, did the gentlelady from Ohio have 

a comment? 

Ms. TUBBS JONES. My question was, you don’t regular order on 

your colleagues, so why on my colleagues? 

Mr. HULSHOF. I have been here for—— 

Mr. MCCRERY. Regular order. 

Mr. HULSHOF. I appreciate that. 

Mr. MCCRERY. Members will resume. 

Mr. HULSHOF. I want to move away from some of the political 

themes sounded by others. Mr. Pomeroy, that is not a reflection of 

your questions. I appreciate the tone of your questions. 

I do want to, and I do—you explained at length, Mr. Secretary, 

for those of us that were here to hear it, the differences between 

your actuaries and our official scorekeeper, which is the CBO. 

I would like to ask you if there are any differences on this issue 

of non-interference? Back home, in Missouri a lot of folks are asking questions about why can’t Medicare set price controls or set the 

price of drugs and implement price controls? 

Mr. Chairman, I am not sure if it has been asked to be submitted 

in the record, but I would ask that a letter from the Director of 

CBO dated January 23rd, to Senator Frist be included for purposes 

of this part of the discussion. 

Mr. MCCRERY. Without objection. 

[The information follows:] 

Congressional Budget Office 

Washington, DC 20515 

January 23, 2004 

Honorable William H. Frist, M.D. 

Majority Leader 

United States Senate 

Washington, DC 20510 

Dear Mr. Leader: 

At your request, CBO has examined the effect of striking the ‘‘noninterference’’ 

provision (section 1860D–11(i) of the Social Security Act) as added by P.L. 108–173, 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. That 

section bars the Secretary of Health and Human Services from interfering with the 

negotiations between drug manufacturers and pharmacies and sponsors of prescription drug plans, or from requiring a particular formulary or price structure for covered Part D drugs. 

We estimate that striking that provision would have a negligible effect on federal 

spending because CBO estimates that substantial savings will be obtained by the 

54 

private plans and that the Secretary would not be able to negotiate prices that further reduce federal spending to a significant degree. Because they will be at substantial financial risk, private plans will have strong incentives to negotiate price 

discounts, both to control their own costs in providing the drug benefit and to attract enrollees with low premiums and cost-sharing requirements. 

If you have any questions we would be happy to answer them. The CBO staff contact is Tom Bradley. 

Sincerely, 

Douglas Holtz-Eakin 

cc: Tom Daschle, Democratic Leader 

Honorable Don Nickles, Chairman, Committee on the Budget 

Honorable Kent Conrad, Ranking Member 

Honorable Charles E. Grassley, Chairman, Committee on Finance 

Honorable Max Baucus, Ranking Member 

Honorable Jim Nussle, Chairman, House Committee on the Budget 

Honorable John M. Spratt Jr., Ranking Member 

Honorable William ‘‘Bill’’ M. Thomas, Chairman, Committee on Ways and Means 

Honorable Charles B. Rangel, Ranking Member 

Honorable W.J. ‘‘Billy’’ Tauzin, Chairman, Committee on Energy and Commerce 

Honorable John D. Dingell, Ranking Member 

f 

Mr. HULSHOF. The non-interference provision, basically as you 

know, Mr. Secretary, we prohibit you or other secretaries of HHS 

from setting these prices. 

Do you agree, or does the CMS agree with the conclusion of our 

scorekeeper that says essentially as follows: striking the non-interference provision would have a negligible affect on Federal spending because CBO estimates that substantial savings will be obtained by private plans, and that the Secretary, referencing you, 

would not be able to negotiate prices that further reduce Federal 

spending to a significant degree. Do you agree or disagree with 

that assessment? 

Mr. THOMPSON. It is hard just to say agree or disagree because, Congressman, CBO has assumed that the repeal of the noninterference yields no savings. Our actuaries have not even addressed this particular subject as such. Until they do, I would like 

to have the input from them to determine if there is going to be 

a huge cost factor. They are the actuaries that I have to rely upon. 

Mr. HULSHOF. We will take that answer as—— 

Mr. THOMPSON. I will be more than happy to get an answer 

to you in regards to our actuaries very quickly. 

[The information follows:] 

The office of the Actuary has reviewed the issue and, based on their preliminary 

assessment, believes elimination of the non-interference provision would have a negligible impact on the cost of the Medicare prescription drug benefit. 

f 

Mr. HULSHOF. You had a very sincere, and I thought passionate exchange with Mr. Ramstad earlier about preventive care 

and wellness. I think certainly within the bill as passed, as far as 

dealing with chronic care, as you know, and again, I think everyone 

on the Committee knows, perhaps those who don’t know the intricacies of Medicare, who may not understand, is that basically the 

Medicare program, as it currently exists before the implementation 

of those reforms, is largely a bill payer. 

55 

Mr. THOMPSON. Uh-huh. 

Mr. HULSHOF. Really there are no programs or there is no 

guidance to assist older patients, depending upon Medicare on focusing on wellness or how to manage chronic illnesses. 

What general statements can you make as far as what this bill 

does, especially as it relates to the number of hospitalizations or 

perhaps home health visit or doctors visits or helping those that 

have chronic illnesses, not only help the system be in a better financial health, but more importantly, help our senior citizens remain in better personal health. 

Mr. THOMPSON. Congressman, your question is so appropriate. 

Thank you. I have been hoping that somebody would ask me that 

question. Right now we spend 92 percent of our dollars in Medicare 

waiting for you to get sick. Then we spend that hundreds of thousands of dollars to get you well again; and less than 8 percent of 

the dollars to keep you well in the first place. 

Anybody that is developing a system like that would say that is 

wrong-headed. What we are trying to do, and the provision that I 

happen to like the best in the bill, is the one that I worked with 

Congresswoman Johnson on, is the preliminary physical, a baseline 

physical for people that come into Medicare. 

When you come into Medicare, right now, 125 million Americans 

are suffering from more than one or more chronic illnesses, that 

spend 75 percent of the costs of medical dollars goes for those illnesses. Most of those illnesses can be prevented or reduced or mitigated. 

What we are going to do with the baseline physicals, we are 

going to be able to get people in there. We are going to find out 

how sick you are. Then we are going to start treating those sicknesses before they come to such an exaggeration that you have to 

spend thousands of dollars to get you well. You will make the lives 

and quality of health better in America, you will save dollars, I am 

confident, and you will finally start addressing preventative health 

in America. 

Mr. HULSHOF. Thank you. 

Mr. MCCRERY. Ms. Tubbs Jones. 

Ms. TUBBS JONES. Thank you, Mr. Chairman. Mr. Secretary, 

thank you for acknowledging my sorority, and welcome. 

Mr. THOMPSON. Are they still here? 

Ms. TUBBS JONES. Some of them. They have been here all day. 

They are probably watching TV with baited breath as we ask you 

questions. I was about to ask you about the ability to negotiate best 

price, but my colleague has already asked the question, and you 

don’t seem to have an answer that you are willing to give at this 

point. I would love to have you give a response at some point about 

pooling all of the seniors in the United States into a pool to purchase drugs at a lower cost. At some point I would love to have an 

answer from you. More importantly—— 

Mr. THOMPSON. Congresswoman Jones, the problem with that 

is that, is we don’t have the pooling concept. Because all of the private—the HMOs, it is the PPOs, it is the PBMs that are going to 

be negotiating, it is not me. 

56 

Ms. TUBBS JONES. Those of us who supported a different piece 

of legislation suggested that was the better means of providing prescriptions to senior citizens. 

Let me—I want to focus in on the health disparities piece, because you have talked about how important it is to you. I have 

been to a couple of events where you have received awards for the 

work that you have done in health disparities, but I have some concerns about what appears in this particular budget. 

The budget, as I read it, cuts the public health improvement account in half. This is reductions to accounts that not only jeopardize electronic information, but also affect programs to eliminate 

racial disparities. Your current budget eliminates most health professional training programs by slashing spending on these programs from $294 million this year to $11 million in fiscal year 

2005, which is a 96-percent cut. 

Let me speak specifically to the Public Health Services Act (42 

U.S.C.), Title 7 and Title 8, where there are health career opportunity programs, the centers for excellence and minority fellowship 

faculty programs. All of these programs which were pushed by my 

predecessor, the Honorable Congressman Louis Stokes, who is 

known across the country as being the person who has pushed to 

see that minority health care is addressed. 

It goes on to freeze funding for maternal and child health, preventive health and healthy start programs, which are very preventive issues. You continue to discuss prevention. Clearly the prevention you are talking about in Medicare will be dealing with seniors 

that are already 65 or 70, so a whole lot of prevention that is going 

to happen at 70 versus prevention that can happen at an earlier 

age. 

Can you tell me why would you cut the programs that were providing opportunities for minorities to get into medical school? We 

know that in the studies that have been done, that culturally sensitive physicians are helpful in allowing people to really be clear to 

their physicians about health care. Can you tell me why, when you 

are talking about the need for disparity, dealing with health disparities that you would cut the very basic programs that are important to providing health care professionals for minority communities? 

Mr. THOMPSON. We thought it was a better way to put the dollars into programs that are going to put scholarships, and in the 

program for the national service corps, to get doctors of color to go 

into areas that really need it. 

We think that it is a much better way. We think that program 

that you are talking about is good. We just think putting the targeted dollars, the little bit of dollars that we have into areas that 

are going to pay for minorities to go to school, and then take the 

responsibility or sign a contract to go out into areas, into minority 

communities to Indian reservations, to areas that really need the 

kind of coverage. That—this directs those scarce resources to places 

that really need it. That is the difference. 

Ms. TUBBS JONES. The difference is—there should not be 

scarce resources, and that every member of the medical profession 

should be directed to help minorities, they shouldn’t just be minorities that are directed to the minority communities. That minorities 

57 

ought to be spread—there should be neurologists, cardiologists, radiologists, and so forth, to work in minority communities. 

All I am saying to you, Mr. Secretary, is in a program that was 

significant for building health professionals for minorities, please 

do not stick me just in a particular community and rank me in that 

area. 

I appreciate your response. The yellow light is about to go. 

Maybe you and I can have an opportunity to sit down and talk 

about these discussions. 

Mr. THOMPSON. Why don’t you come on over? 

Ms. TUBBS JONES. I would love to. I would love to offer some 

legislation that you might get your Republican colleagues to support on my behalf. Thank you. 

Mr. THOMPSON. Stop over and have lunch and see my operation. 

Ms. TUBBS JONES. Thank you. 

Mr. MCCRERY. Mr. Weller. 

Mr. WELLER. Thank you, Mr. Chairman. Thank you for your 

time and patience and perseverance today in appearing before our 

Committee. It is a pleasure to work with you. I also want to commend you and the President for your leadership on health care 

issues. Both parties have talked for years about providing prescription drugs under Medicare, and the President’s leadership and your 

leadership—— 

Mr. THOMPSON. For 12 years. 

Mr. WELLER. We got it done. For that I commend you. I also 

commend the President on the Association Benefit Plans proposal 

which has passed the House, we are waiting for the Senate to address. I particularly want to focus my questions in my limited 

amount of time on success that you have been making, with the 

support of us in Congress, on Community Health Centers. 

As you noted in your testimony, with the support of the Republican Congress, in the 31⁄2 years of the Bush Administration, the 

Administration has funded 614 new and expanded Community 

Health Centers in this country, helping low-income families and individuals, effectively increasing access to health care for an additional 3 million people. 

That is a 29-percent increase over when George W. Bush became 

President. For that I congratulate you, because I am a strong believer in Community Health Centers. I think the Will County Community Health Center just a few miles from my home, and the 

families and the people that have been served, and the health care 

that is available through there. 

I note in the President’s budget you request an additional $218 

million for Community Health Centers, another record increase in 

funding for Community Health Centers, which we agreed to last 

year, and providing a record increase in this past year. The President has a goal of doubling the number of Community Health Centers, having around 1,200, and I certainly stand in strong support 

of that. 

As you look at this year’s record increase in funding, what role 

do you see for Community Health Centers in addressing issue of 

the uninsured? 

58 

Mr. THOMPSON. They are the first line of defense for those individuals that are underinsured or uninsured. It also gives sort of 

a comfort level for people you know that are fearful of going to a 

large institution, going to a hospital or going someplace else. They 

feel uncomfortable because their neighbors go to the Community 

Health Center, they have known somebody that has been there 

that has been treated well. 

Plus, the health care, the medicine that is practiced in these 

Community Health Centers are really outstanding. The doctors 

that we have, and the nurse practitioners and the nurses in Community Health Centers are some of the best and compassionate 

people that we have in our society. So, you get good treatment. 

There is a comfort level. A plus they are there across the country 

to give people the access that they need to get their medical needs 

taken care of. I can’t say enough about them. I thank you for your 

leadership and support for accomplishing even bigger and better 

times for Community Health Centers. 

Mr. WELLER. Well, I certainly agree with you, they have a tremendous role. Again, the Will County Center just a few miles from 

my home, serves hundreds and hundreds of families. They do a 

wonderful job. They are expanding, thanks to the support of this 

Congress. One of the concerns I often hear, though, from some of 

the health centers that are in Illinois is the issue of reimbursement. 

Mr. THOMPSON. Yes. 

Mr. WELLER. For providing care to Medicare patients because 

of a CMS imposed payment cap. We have raised this issue before, 

and it is an issue I would like to work with you on to ensure that 

they are adequately reimbursed. I was wondering if you had any 

thoughts on that, because obviously if we want to provide quality 

care we have to provide adequate reimbursements for Community 

Health Centers. 

Mr. THOMPSON. Well, we did try a minimum per capita payment, but we are always looking for ways to improve the system. 

I have found, being in politics as long as I have been, that some 

of the best ideas that I get are going out to places that are asking 

for the services, in this case Community Health Centers, and just 

talking to them and finding out what the problems are, but at the 

same time finding solutions. 

If you can work with us, our doors are wide open. Dennis Smith 

is here, who is the acting head of CMS, and we would love to work 

with you. If you have got any good suggestions how we can improve, let us know. 

Mr. WELLER. Thank you. Thank you, Secretary. I certainly support President Bush’s and your goal of doubling the number of 

Community Health Centers serving America. I am certainly interested in working with you on this reimbursement issue. So, thank 

you, Mr. Secretary. 

Mr. MCCRERY. Thank you, Mr. Weller. Mr. Tanner. 

Mr. TANNER. Thank you, Mr. Secretary, for being here and for 

your patience. I am sorry I had to be out for a minute. I think we 

have had a good discussion about the present, Mr. Secretary, but 

what I want to ask about is the future. 

59 

Mr. Snow, the Secretary of Treasury was here last week. It used 

to be we talked about the solvency of the Social Security system 

and Medicare. Some of us are now worried about the solvency of 

the country. 

The budget that has been submitted, although we know that the 

hope is to get to half of the yearly deficit in 5 years, never balances, and we know what the demographics are beyond that time. 

I am, Mr. Secretary, truly concerned about the financial solvency 

of this country. The situation is such that if you read the comments 

in the London Financial Times, you read what the G7 is saying 

about our situation, you know that Asian banks are considering 

pulling out of their currency of choice being the dollar. You know that we have a $500 billion trade deficit. We also realize that the true deficit this year, once one takes out the Social Security receipts is really on the order of $700 and some odd billion 

rather than $500 billion. 

My question really is, given your fiduciary relationship with the 

Medicare and Social Security systems, is there any advice you 

could give to this Committee, or what advice do you have with regard to the long-term picture? I am just beside myself. 

I told Secretary Snow, it looks to me like we were in a death spiral if we were in an airline, and unless something happens, we are 

going to hit the ground. Herbert Stein said what can’t go on forever 

doesn’t. At some point we are going to be so burdened with interest 

payments on the debt, that there is not going to be much of anything left to finance Medicare, Social Security, or anything else for 

that matter. 

I realize the short-term consequences of hard political decisions, 

but in your March meetings that you alluded to earlier, is there 

any hope that we can get some recommendations, maybe we can’t 

act on them this year because everybody knows what kind of shape 

we are in in this town this year. 

I know speaking for some of us, we are willing to do virtually 

anything to try to stop this, what I call death spiral of debt, and 

the attendant carrying charges called interest. 

Nobody says that is a tax increase, but it is probably the largest 

tax increase we could put on the American people, when one considers that every trillion dollars that we borrow is a $40 billion obligation that year and the year thereafter and every year thereafter, for which we receive virtually nothing in terms of services, 

and for which 37 percent of it is being presently bought and held 

by foreigners as we write checks for interest on the obligations that 

the Treasurer auctions off from time to time. 

So, could you give us some insight as to what you believe might 

come out of these discussions based on the long-term, because I 

think the short-term speaks for itself. I don’t see how we can continue to forecast deficits every year with no hope of balance, given 

the demographics of the country, as well as what is happening in 

the world with respect to our trade deficit. 

So, with that, let me just ask for your help, advice or insight. 

Thank you. 

Mr. THOMPSON. Well, first, thank you, Congressman Tanner. 

That was a well thought-out question, and I appreciate that very 

much. I appreciate your passion on the subject. 

60 

I am concerned about Social Security and Medicare, because that 

is my fiduciary responsibility. I can see serious problems coming. 

I believe that the Medicare Modernization Act was the first step toward recognizing the problems, and you and I can differ on that. 

Let me just elucidate a little bit. First off, it is the first time we 

have indexed Part B deductibles. That is a step in the right direction. We had income related to Part B premium, which is another 

thing that is going in the right direction. 

We got a 45-percent trigger that got into Medicare, not as tough 

of a trigger as I was proposing, but it is still a trigger. I think that 

the trustees are very concerned, and agree with some of your assumptions in regards to the importance to address Medicare in Social Security in the future. 

I think Congress is going to have to address Medicare and Social 

Security. They are going to have to. There is no other question. I 

think that maybe not this year, but 2005 and 2006 are years in 

which I think this country has got to start facing up to looking at 

ways and how we are going to finance Medicare and Social Security, especially with the demographics. I happen to agree with you. 

Mr. MCCRERY. Thank you, Mr. Secretary. Mr. Ryan. 

Mr. RYAN. Thank you, Mr. Chairman. It is great to see you, Secretary. 

Mr. THOMPSON. It is always a pleasure to see you, Paul. 

Mr. RYAN. It was snowing a lot in Wisconsin this morning. So, 

it is nice and warm here. So, nice to see you here rather than Wisconsin today. 

Mr. THOMPSON. Thank you. 

Mr. RYAN. I have a couple of specific questions on the new Medicare law. Number one, I want to talk about quality; number two, 

I want to ask you about some of the Medicare advantage plans that 

grow out of those. One of the most important parts of this bill I 

think and others have said it, are the new health savings accounts. 

That empowers consumers to be consumers, but you can’t be a good 

consumer in the health care marketplace if you are not equipped 

with good knowledge of quality and price. So, that is why the quality initiative that is in Medicare legislation with respect to hospitals, in particular, I think is so important. 

Where is—where is the agency on the quality initiative? I know 

that you have a couple of dates that you have a choice to pick when 

the quality initiative is rolled out; at the beginning of the summer 

or at the end of the summer, I think. 

Otherwise, if the hospitals don’t meet I think their market baskets, they won’t get the full update. Could you give me a quick 

summary on where you are with the quality initiative, and are 

there any other quality and price data rollout initiatives that you 

are contemplating over there at the agency? Then I have a quick 

follow up. 

Mr. THOMPSON. Well, first off, the Department has set up a 

whole plethora of rollouts as far as quality are concerned. We have 

the nursing homes, the comparison in nursing homes, which is up 

and running, which wasn’t even thought of until 3 years ago. We 

started it under my leadership, and we are doing things with the 

home health. We have got some new quality initiatives on home 

health. We are going to do something on hospitals. 

61 

In regards to the Medicare, the acute care hospital payments updates, that is going to be one where data is going to have to be submitted for the most recent available calendar quarter of discharges 

for both Medicare and non-Medicare discharges. I can give you a 

whole package of these things, but right now we are still working 

on implementing them. 

Mr. RYAN. Are you going to do the hospital initiative at the beginning of the summer or the end of the summer? 

Mr. THOMPSON. June 1st. 

Mr. RYAN. Great. That is good news. Second question. The 

Medicare advantage plans. I am just curious at your response that 

you have gotten from the market that is out there, the PPOs, the 

HMOs and the other types of plans that would be offering plans. 

Obviously, they are going to want to see what the regions are going 

to look like before they really get serious about taking a look at offering plans to areas. So, question one is, where are you on getting 

these regions set up? Have you begun to get the rough sketch of 

the regions? 

Number two, I am just curious, what has been the reaction in 

the private sector with respect to the advantage plans kicking in, 

especially with the PPOs? 

Mr. THOMPSON. As you know, the law, Congressman, is that 

we have to have at least 10 and less than 50, and each region has 

got to have at least one State in it. I can—we are looking basically 

at somewhere in the area of 12 to 15 regions. That is what we are 

looking at, more on the lower side than the 50. We think it would 

be much more efficient and allow for—— 

Mr. RYAN. Did you say 12 to 50? 

Mr. THOMPSON. The law says it has got to be between 10 to 

50. We are looking at the lower end of it, because we think it would 

be better to have larger regions than smaller ones. We haven’t 

made a final decision. We will keep you informed as a lot of people 

are concerned about this and interested. 

In regards to the interest, everybody is really pretty excited 

about the law. There is just a lot of interest. Those people that 

have been in Medicare+Choice, I think you are going to see an expansion this year where we have seen nothing but declines in the 

past. We are down to 11.8 percent, 11.8 percent of the individuals 

in Medicare+Choice. We think that is going to grow. We are seeing 

a lot of individuals who have indicated that they are going to be 

reducing their premiums and increasing their benefits in order to 

grow their share. 

So, it looks very, very promising. I think our actuaries think that 

within 10 years that one-third of the individuals will be in Medicare advantage programs, or PPOs. 

Mr. RYAN. I think that is so important. Of all of the things and 

the responsibilities that you have ahead of you, this is a huge responsibility. When folks come to you and say we wish we had access in Medicare to plans just like you as a Federal employee and 

Members of Congress have, this is what it is. These Medicare advantage plans give seniors access to the same kinds of plans that 

we as Members of Congress and Federal workers have for themselves and their families. 

62 

So, I am just excited about the fact that seniors have a few 

choices available to them that are comprehensive. I am just eagerly 

awaiting the rollout of these plans. As soon as you have those details, we would really like to take a look at these. 

Mr. THOMPSON. Thank you. Thank you for your leadership in 

the State in regards to this. Appreciate it. 

Mr. MCCRERY. Mr. Shaw. 

Mr. SHAW. Thank you. Mr. Secretary, it is also a delight to see 

you. You are one of my heroes in the Administration. Every time 

I see you, I think back to 1996 when we were able to form a partnership, you as a Governor and me as the Chairman of the Subcommittee on Human Resources to, really on a rescue mission, to 

take so many people out of poverty. 

Back then it was predicted by the opponents of the welfare reform bill that we were going to throw a million kids into poverty. 

There were comments made in this Committee room and on the 

House floor that people are going to be sleeping on grates and how 

horrible it was going to be. 

Quite the contrary has happened. We have taken 2 million kids 

out of poverty. We have cut the welfare rolls by 50 percent. We 

have maintained level spending on TANF in order to get to the 

hardest to help and the hardest to get out of poverty. Do you think 

the $17 billion, and I believe that figure is correct, correct me if I’m 

wrong but—— 

Mr. THOMPSON. It is $16.5 billion. 

Mr. SHAW. Do you think that is sufficient? 

Mr. THOMPSON. Absolutely. When you have got half of the population of the—they are going to be harder to place, but each individual applicant is going to have $7,000, closer to $16,000 behind 

them in order to get that individual placed. 

We think the increased money that this House, you have supported an additional billion dollars, is going to be good for child 

care. So, we think it is a very good proposition that you sent over 

there. We think it is going to be very good. 

All I can say in completing my answer to you is that we would 

not be here if it would not have been for your leadership, Clay. I 

thank you very much. You were outstanding. You were steadfast. 

You took a lot of criticism, but you were resolute in your leadership, and I always appreciate that and thank you very much. 

Mr. SHAW. You are very kind. I appreciate that, particularly 

coming from you. I want to switch into another area, this is a troubling area that I have jurisdiction over as Chairman of the Subcommittee on Social Security. This is something we have got to get 

on very quickly. 

All kinds of stories are saying don’t worry about it until 2040, 

but you and I both know that we are going to have to look, beginning in 10 to 12 years, are we going to look around and say where 

are we going to get the money to pay the benefits? We can’t send 

Treasury bills to our seniors. So, I hope we can really get this up. 

I know in an election year, such as that we are about to finish 

up, that it is going to be very difficult to get particularly bipartisan 

support. That was, you know it is, even though President Clinton 

vetoed that welfare reform bill two times, he did sign it on the 

63 

third time, we gave it bipartisan credibility, which was tremendously important. 

I keep reaching out to try to pick up allies on the other side of 

the aisle in order to bring a welfare bill to the House floor. I know 

the President is committed to it, and I hope that we can get on this 

very quickly. 

I want to, in the time I have here, your jurisdiction is so vast, 

5 minutes isn’t nearly enough, but I want to bring something to 

your attention, and also to my colleague, Nancy Johnson’s attention, who is Chairman of the Subcommittee on Health. 

Something that I ran into this weekend—perhaps you already 

know about it—but it actually, I think, proves that this discount 

card is going to work. I had a constituent at one of the meetings 

that I was holding down in Palm Beach County who has diabetes 

and high blood pressure. The amount of medication he was taking 

and his prescription was costing like $60. I will leave the drug 

store unnamed at this particular point. 

Then he went to one of the discount places and found out that he could get the same medicine for $12. This means, and I think 

that we need to look into exactly what drug stores are charging, 

and what opportunities that patients have to shop around and look 

for the best deal. It is a marketplace that is going to save us on 

this. I think that is going to play very heavily into the workings 

of the 25 percent or the discount that we are hoping to get. That 

means that someone in the private sector can do that shopping for 

our seniors and get them the best deal possible. 

Mr. THOMPSON. Absolutely. We are going to have on our 1– 

800–Medicare and our computers, that you are going to be able to 

call up and you are going to be able to find out and compare card 

to card as to say, Lipitor, which is a very popular drug for cholesterol. 

Mr. SHAW. This is the one of the ones—— 

Mr. THOMPSON. You are going to be able to have some comparison shopping on your computer as to what card is giving you 

the best discount on Lipitor. You can bet your bottom dollar, once 

that happens, that there is going to be some other companies and 

other PBMs that are going to be cutting that to make sure that 

they get the market share. 

You are going to see a ratcheting down of drugs when we roll out 

these cards. We are going to put some comparison shopping up on 

the board so that you can come up and get the information as a 

senior. If you don’t have a computer which somebody says, well, 

they don’t have a computer, you are going to put people in the community that is going to assist you in order to be able to find out 

the best card for you. 

Mr. SHAW. That is great news. I think the marketplace is the 

best controller. 

Mr. THOMPSON. The marketplace is going to drive down the 

price of drugs. 

Mr. SHAW. Most people just go to the drug store and give them 

a prescription and come back and pick it up and never shop it. 

Mr. THOMPSON. We are going to do the shopping. 

Mr. SHAW. It is like going to the filling station with the lowest 

price posted. 

64 

Mr. THOMPSON. That is what we are going to do. 

Mr. SHAW. Thank you. 

Mr. THOMPSON. We found on comparison of nursing homes, we 

put the quality up there, and you can’t believe how many seniors 

are checking in on the quality standards that we put up on nursing 

homes. That is driving quality improvements in the whole nursing 

home industry. 

We are going to do that with hospitals, now with the card. You 

are going to find that the seniors are going to be looking to Medicare to get them the information to do the correct shopping for 

themselves. 

Mr. SHAW. Good news. Thank you, Mr. Secretary. 

Mr. MCCRERY. Ms. Johnson. 

Mrs. JOHNSON. Thank you, Mr. Chairman. Mr. Secretary, I am 

sorry my plane was so late that I missed your comments and most 

of the hearing. First of all, it is—I know there is this controversy 

about cost, but that goes back. I will look at what you said. 

Mr. THOMPSON. I went over all of the cost. 

Mrs. JOHNSON. I am sure that you did. That goes back to some 

differences in judgment. What is really exciting about this bill, that 

so far all of the news is very good. 

As you mentioned, the advantage plans are pushing down premiums, increasing benefits. They are just going to take off. They 

are the first access seniors will have to disease management, because for the first time we mandated that they have to provide disease management. The discount and the number of companies 

going to want—having put in letters to say that they want to be 

part of the discount plan—— 

Mr. THOMPSON. There is 106. 

Mrs. JOHNSON. One hundred six. That means that competition 

will be intense and the prices will be pushed down dramatically. 

I just want to compliment you and your staff on implementing, 

to this point, the cancer care new system of payment. The speed 

with which they have implemented the new practice expense formula, the degree to which they have kept physicians informed, and 

the groups in Washington part of the conversation, has really alleviated a lot of the concern and fear. There are plans for a very open 

process during this year, really, going to help assure that cancer 

care treatment in communities will not be adversely affected by a 

more honest payment system. 

While they implemented the statutory provisions in regard to 

practice expenses the next portion where we go through the coding 

system and make sure that the codes are updated for what is really 

a very different kind of delivery system than ordinary office practice, will be very important. It will be very important that they 

oversee that well. It will be very important that the cancer community be very involved in that, because that has to come out right 

so that 2005 and 2006 and the years thereafter will come out right. 

I am very impressed with how well they have kept the community informed, and under rather adverse circumstances, because of 

the way the law—at the time in which the law was passed. So, I 

really commend them on their work with oncology at this point and 

look forward to working with them. 

65 

What I wanted to ask you is how are you coming on implementing the chronic care provisions? One of the most startling, and 

kind of outrageous failings of Medicare is that it doesn’t provide 

seniors with chronic disease the kind of help and support they need 

to keep healthy, to improve their quality of their retirement years 

and to control Medicare costs. 

In the very polarized debate that characterized the public discussion of this bill before the votes and for the most part immediately 

thereafter, this whole issue of quality care and the way this bill 

pushes forward a whole new era of quality care for seniors was 

lost. 

Since these programs are at the heart of improving quality and 

also the responsible way to approach cost control, I thought it 

would be a good idea if you could update me and the Committee 

on, and the public on how you are coming with implementing the 

disease management programs under the new law? 

Mr. THOMPSON. First, let me just quickly go through this chart 

with you. Do you have that chart? 

Mrs. JOHNSON. I got the chart. 

Mr. THOMPSON. A $100 million difference is mainly on people 

wanting more access. The first one, $47 billion is for individuals 

that are low-income, that are going to be partaking of the services 

more. That is the biggest difference. Over one-third of the difference is that more low-income Americans are going to come in 

and use the system. I think that is positive. 

Mrs. JOHNSON. If you will let me interrupt for a minute. I 

think when people figure out how good this is for low-income, you 

may very well be right. When you look at how many people are eligible for Medicaid and don’t do it, are eligible for Quimby, Slimby 

and simply don’t do it, I think that is what affected our estimates. 

So, that is perfectly reasonable. 

Mr. THOMPSON. The second part is, we think that 94 percent 

of the individuals are going to participate in it, whereas CBO 

thinks 87 percent. You know that is $32 billion. That is human nature. Who knows what is going to be there in 5 or 6 years? I think 

it is quite positive. 

In regards to your prevention and chronic illness and disease 

management, let me thank you. To me, this is the most important 

part of the bill. You and I teamed up on this one. I happen to 

think, this happens to be yours and my baby. We are going to 

make it work. I happen to be more interested in making this thing 

work than anything else. 

If there is one way to improve the quality of health in seniors, 

it is through first a baseline physical, that we got in, then to start 

managing their diseases after we find out how sick they are. To me 

it is the right thing to do. We are already starting soliciting comments. We are also going to hopefully have our first contract later 

on this year so that we can get started early next year. 

I just think that first off, thank you. Second off, I can assure you 

that this is one thing I have a personal stake in, and I am going 

to make everything revolve around this particular proposition. 

Mrs. JOHNSON. Thank you. 

Mr. MCCRERY. Mr. Rangel. 

66 

Mr. RANGEL. Thank you, Mr. Chairman. I want to thank you, 

Mr. Secretary, for the tone in which you set at these hearings and 

recognizing that our goal has to be a bipartisan effort. Also to see 

whether or not we can reinstate the cooperation that we have always had on this Committee with the chief actuary. As you know, 

as independent as they are, it is necessary for the committees of 

jurisdiction to be able to communicate with them. 

In the past this has not been so, and as you pointed out that 

many of the issues that we were concerned about was discussed in 

the conference, and without belaboring the point that still did not 

give us access. So, in the spirit of the cooperation in which this office was developed, I assume that we can depend, on your cooperation, to give the majority and the minority access to the chief actuary for purposes of formulating legislation. 

Mr. THOMPSON. Congressman, absolutely. I think—I may have 

been derelict in allowing my administrator, Tom Scully, to have 

more control over it than I should have, but he did an excellent job. 

He is very intelligent. Maybe he micromanaged the actuaries and 

the actuary service too much. I can assure you that from now on, 

for the remaining days that I am Secretary, you will have as much 

access as you want to anybody or anything in the Department you 

want, and all you have to do is call me. 

Mr. RANGEL. Thank you very much, Mr. Secretary. 

Mr. MCCRERY. Mr. Secretary, thank you very much. You have 

been very generous with your time today and as usual, your responses to the Committee’s inquiries have been forthright and very 

informative. We look forward to seeing you next time. 

Mr. THOMPSON. Thank you. 

[Whereupon, at 5:00 p.m., the hearing was adjourned.] 

[Additional written questions submitted from Representative 

Portman to Mr. Thompson, and his responses follow:] 

Question: Mr. Secretary, I was extremely pleased to see that the President’s budget proposes to continue the Children’s Hospitals GME (CHGME) 

program’s full funding for FY05 at $303 million. That’s a 29-percent increase since President Bush took office. 

This is a program that our Chair, Nancy Johnson, sponsored and many 

of us enthusiastically support. The Department has done great work in implementing this discretionary grant program and the program greatly benefits children’s hospitals like Cincinnati Children’s Medical Center, which 

will receive more than $12 million this year under the CHGME. 

As you know, the CHGME program is now located in the Health Resources and Services Administration—HRSA—under the Public Health 

Service and not in the jurisdiction of this Committee. But, it does use Medicare rules, particularly in determining the number of Full Time Equivalent 

residents the hospitals receive payment for. I understand that Children’s 

Hospitals are happy with this arrangement. Otherwise, they would have no 

framework for the program, and it would have taken a long time to set up. 

Also this program was meant to provide ‘‘equity’’ in federal GME funding 

for the children’s hospitals until any larger GME reform that could encompass them might be enacted. So, FTE residents should be counted the same 

way, by and large. 

Many of the children’s hospitals fill out full Medicare cost reports and 

are providing GME related data to both CMS and HRSA. Last year, HRSA 

began operating its own separate fiscal intermediary contract for the 

CHGME program. 

I’m interested in learning more about how HRSA and CMS are able to coordinate information and expertise to enable the CHGME to run as efficiently as possible with the least possible duplication of data requirements 

with Medicare. For example, many of the children’s hospitals have a signifiVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00070 Fmt 6633 Sfmt 6621 E:\HR\OC\A228A.XXX A228A
67 

cant number of residents ‘‘rotating’’ through their facility from other teaching institutions, as well as the resident programs they sponsor. CMS, with 

its fiscal intermediaries, has data on these rotators through its resident 

tracking system to help assure that they are not counted more than once. 

Are HRSA and its fiscal intermediary able to use the Medicare data system to avoid duplications, or does HRSA also have to collect data and develop its own system for children’s hospitals? 

I’m hoping that you can share with us your comments on how HRSA and 

CMS are working together on CHGME, whether HRSA is using the CMS fiscal intermediary (IRIS) resident information, and any other major issues 

that have arisen that might require our attention, since changes that we 

make in Medicare GME provisions can have implications for the children’s 

hospitals GME program. 

Answer: The Children’s Hospitals Graduate Medical Education Payment Program 

(CHGME PP) established a comprehensive methodology for assessing the full-time 

equivalent (FTE) resident counts reported by eligible children’s hospitals for purposes of CHGME payments. This work is being done under contract, and the 

HRSA’s contractor for this work, Blue Cross and Blue Shield Association (BCBSA) 

located in Chicago, is also the principal contractor for similar auditing activities carried out by the Center of Medicare and Medicaid Services (CMS). 

HRSA developed a methodology that parallels that of Medicare. As part of this 

assessment process, the CHGME fiscal intermediaries (FIs) conduct ‘‘duplicate 

checks’’ based on the data that is available for that area by using the Medicare data 

systems. If a resident is being claimed by another acute hospital (general or children) the resident is not counted, and the children’s hospital is asked to resolve the 

duplication. There is no national database of all residents being claimed by teaching 

hospitals and there is generally a lag time before Medicare completes the audits of 

FTE residents being claimed by teaching hospitals. However, HRSA has instructed 

its fiscal intermediaries to use the current Medicare data system to avoid duplications of FTE resident counts. Furthermore, about 1⁄3 of children’s teaching hospitals 

receiving CHGME payments never reported FTE resident counts to Medicare. In 

order to assist these hospitals, HRSA developed and distributed free software (IRIS) 

that helps children’s hospitals with the FTE resident assessment process and allows 

the CHGME and the Medicare FIs to conduct the ‘‘duplication checks.’’ 

As part of its effort to minimize burden on the children’s hospitals, CHGME FIs 

are instructed to obtain work-papers (or audit papers) from the Medicare FIs before 

requesting such papers from the children’s hospitals. Furthermore, upon completion 

of an FTE resident assessment by the CHGME FI, copies of work-papers are sent 

to Medicare FIs in cases where the two FIs work for different organizations. BCBSA 

intervenes in cases where the CHGME and the Medicare FIs disagree in the audit 

findings and helps resolve any outstanding questions. These steps are designed to 

ensure that there is no duplication of efforts and that the hospitals are audited once 

to establish the FTE resident counts. 

Question: I was very pleased with the President’s budget proposal to continue to allow states to transfer up to 10 percent of their TANF funds to 

the social services block grant (SSBG). The ability to transfer these funds 

has allowed Ohio to provide a wider variety of services to families than 

would be allowed under the TANF program. The flexibility afforded by this 

transfer has been instrumental in the success of Ohio’s welfare reform efforts by allowing us to more holistically meet the needs of the poor. 

The 10 percent transfer annually provides millions of additional SSBG 

dollars in Ohio for domestic violence programs, child welfare, home-based 

services for disabled children and adults, adoption assistance and supports 

local food banks. This transfer is also vital to support the counties’ local 

reform efforts and without this transferability many of our most successful 

prevention and retention programs would be lost. 

Will the administration continue to support state’s ability to transfer 

TANF funds into SSBG? 

Answer: Yes. The President’s welfare reauthorization plan, Working Toward Independence, proposed to permanently restore full 10% transfer authority to the Social 

Services Block Grant. 

Question: As you know, the Education and Research Centers—ERCs— 

funded through the National Institute for Occupational Safety and Health 

provide the leadership in occupational medicine, environmental and industrial hygiene, safety engineering and occupational health nursing, as well 

68 

as continuing education and service to the community in all of these disciplines. 

The University of Cincinnati ERC serves a region of the country that includes substantial employment in agricultural, manufacturing and service 

sectors, and a large population base that may be at risk during release of 

a hazardous material, either intentional or unintentional. 

The region’s extensive highway system and port facilities along the Ohio 

River increase these concerns. The ERC research conducted at the University of Cincinnati is valuable both to the region and the nation. Recent 

projects have included respiratory disease among employees exposed to 

metal working fluids, better understanding of injury during auto collisions, 

the influence of landscape and buildings in dispersion of hazardous materials spills, and identification of factors contributing to workplace violence. 

In addition, NIOSH ERCs play a crucial role in preparing occupational 

safety and health professionals in the fight against terrorism. Even before 

the tragedy of September 11, ERC faculty and graduates have worked for 

several years with emergency response teams to minimize losses in the 

event of a disaster. Some participated directly in monitoring efforts at the 

disaster sites. These tragic events, and the new threats faced by emergency 

responders, mail handlers, and other workers, illustrate the great concern 

for workplace health and safety needed in the ongoing war on terror. The 

role of ERC research and training has now been expanded to include more 

attention to identifying and reducing vulnerabilities to terrorist attacks. 

So, I believe the need for the expertise of the graduates from this program 

yearly is growing dramatically, and I’m delighted that since President 

Bush took office, spending on ERCs has increased by about 11 percent. 

As the workplace continues to become a critically important focus of 

homeland security, I would welcome your thoughts on the need to encourage more professional education in these areas. 

Answer: Thank you for your concerns about worker safety and health and your 

recognition of the important role of the CDC’s National Institute for Occupational 

Safety and Health and the NIOSH Education and Research Centers in protecting 

the workplace from both well-recognized hazards and new and emerging threats. 

NIOSH supports 16 ERCs at leading universities across the country—including the 

ERC you mention at the University of Cincinnati. The ERCs provide graduate and 

continuing education programs in core occupational safety and health disciplines 

such as occupational medicine, occupational health nursing, industrial hygiene, safety, and related fields such as occupational epidemiology and injury prevention. 

ERCs are important regional resources for those involved with occupational safety 

and health, including industry, labor, government, academia, and the general public. They prepare practitioners, specialists, and research scientists to meet critical 

regional workforce needs and to conduct needed research to improve the safety and 

health of working Americans. 

We recognize and appreciate the important work of NIOSH and its ERCs in addressing the challenges of the changing workforce, strengthening the base of health 

and scientific researchers and practitioners qualified to help protect and promote 

worker health, and expanding capacity to address terrorism, emergency preparedness and response, and related homeland security issues in the workplace. We will 

continue to support and encourage the valuable role of NIOSH and these key centers of excellence in these important new areas. 

f 

[Submissions for the record follow:] 

Statement of National Association of Chain Drug Stores, Alexandria, 

Virginia 

Mr. Chairman and Members of the Subcommittee. The National Association of 

Chain Drug Stores (NACDS) is pleased to submit this statement for the record regarding our priorities for programs under the direction of the Department of Health 

and Human Services (HHS), as reflected in the President’s proposed Federal Fiscal 

Year 2005 budget submission. Some of these priorities are directly related to budget 

matters, while others reflect program implementation and operational concerns. We 

look forward to working with you and the Members of this Committee on these 

issues. 

69 

1 Congressional Record, Senate, November 24, 2003, p. S15744. 

2Medicare Program; Changes to Medicare Payment for Drugs and Physician Fee Schedule 

Payments for Calendar Year 2004; Interim Final Rule, CMS–1372–IFC, January 7, 2004. 

NACDS represents more than 200 companies that operate more than 35,000 community retail chain pharmacies. We employ more than 107,000 pharmacists and 

about 3 million total employees, and provide over 70 percent of all outpatient prescriptions in the United States. 

Medicare 

Medicare Prescription Drug Benefit Implementation: NACDS looks forward 

to working with the Congress and Administration on implementation of various provisions of the Medicare Modernization Act (MMA), P.L. 108–173. This will clearly 

be an enormous undertaking for the Administration in a rather short time frame, 

and we are already interacting with staff of the Centers for Medicare and Medicaid 

Services (CMS) on such issues as implementation of the discount card program and 

the Part D prescription drug coverage program which begins in 2006. 

Among our highest priorities for the Part D coverage program are assuring that 

the pharmacy access standards included in the Part D section of the bill are implemented consistent with Congressional intent. This refers to the so-called ‘‘TRICARE 

access’’ standards. We are concerned that CMS’s implementation of these standards 

in the Medicare-endorsed prescription drug discount card and transitional assistance program is inconsistent with Congressional intent. As a result, beneficiaries’ 

access to their local community retail pharmacy will be reduced. As we understand 

it, CMS is allowing endorsed card sponsors to implement these standards on average across an entire service area, rather than in each state in the service area. We 

are particularly concerned about the impact of this interpretation on beneficiaries 

in rural areas, who might have to travel much longer distances to a pharmacy if 

the one closest to their home is not in the pharmacy network. These shortcomings 

should be corrected before the Part D coverage program is implemented, which is 

scheduled for 2006. 

We will also work closely with CMS and Members of Congress to assure that 

beneficiaries are able to obtain covered Part D services—covered prescription drugs 

and medication therapy management services—from their pharmacy provider of 

choice. That is, we believe that the law requires plan sponsors to allow beneficiaries 

to obtain the same amount, scope, and duration of services from retail pharmacies 

as mail order pharmacies, whether the pharmacy is part of the network or not. We 

believe that it was clearly the intent of Congress to create as level a playing field 

as possible between retail and mail order pharmacies, and that the entities that are 

administering the Part D prescription drug coverage programs should do all they 

can to make any cost differences between mail order and retail pharmacy minimal 

for the beneficiary. In fact, in a colloquy between Senator Enzi, the provision’s sponsor, and Senate Finance Chairman Grassley, it is clear from Senator’s Grassley 

statements that: 

‘‘Medicare drug plans and Medicare Advantage organizations should not 

force seniors or the disabled to choose a mail order house when they would 

prefer to patronize their local community pharmacy . . . it is my expectation 

that any differential in charge be reasonable and based on the actual cost 

of providing the service in or through the setting in which it is provided.’’ 1

Finally, we are concerned about the structure and payment rates for drugs and 

pharmacy services that will be established for Medicare prescription drug ‘‘fall back’’ 

plans. These plans will exist in areas of regions where there are no risk-based Part 

D prescription drug plans. We want to be sure that pharmacies are paid adequately 

for providing pharmaceuticals and pharmacy services under these plans, and that 

payment rates are structured so that generic drugs are encouraged when they are 

the most cost-effective and therapeutically appropriate. 

Medicare Part B Covered Drugs Supplying Fee: The interim final rule for 

the new Part B covered drug payment rates—published on January 7th by CMS 2— 

fails to provide for a statutorily-mandated pharmacy supplying fee for certain Part 

B covered drugs. In its interim final rule, CMS indicates that it will not pay a separate Medicare Part B pharmacy supplying fee for 2004, but will rather ‘‘bundle’’ that 

payment with payment for the drug. 

We believe that this effectively ignores the statutory requirement to establish a 

pharmacy supplying fee. Establishing a pharmacy supplying fee was consistent with 

the entire approach taken by this program reform, which was to more accurately 

70 

pay for the cost of acquiring drug products, but also more accurately reflect the cost 

of safely delivering the product to patients. We believe that the pharmacy supplying 

fee is essential to this ‘‘logic.’’ We urge CMS to publish a final rule quickly that 

would provide this supplying fee for this year, as well as future years. 

We are also concerned about future changes in reimbursement to the Medicare 

Part B program that would tie pharmacy level reimbursement to manufacturers’ 

level pricing metrics—such as average sales price (ASP) or average manufacturers’ 

price (AMP). Even with some percentage markups, these metrics do not reflect the 

additional costs added to the cost of the drug product as it moves from the manufacturers’ level to the community pharmacy level. In addition, their use is not appropriate in a real-time environment in which manufacturers’ prices are changing constantly, since ASP and AMP rely on data that are generally several months outdated. They can also discourage generic usage, since they do not allow for sufficient 

incentive to encourage the dispensing of generics. 

Pharmaceutical Transition Commission: It is important to create a seamless 

transition to the new Part D prescription drug benefit for Medicare beneficiaries 

who currently have outpatient prescription drug coverage—whether it is from state 

pharmaceutical assistance programs, Medicaid, or employer-based coverage. 

For that reason, we strongly support the establishment of the State Pharmaceutical Transition Commission established under the MMA, and request that representatives of the community chain pharmacy industry be appointed to the Commission. Our industry has significant experience with existing sources of prescription drug coverage for Medicare beneficiaries, and will be the focal point for helping 

seniors coordinate their various prescription drug benefit programs. Among other 

items which we believe the Commission should address, requirements to obtain and 

provide information to pharmacies about other sources of beneficiary coverage 

should be placed on the Part D plans, not the pharmacies. 

Billing for Supplies Using a Real-Time Standard: NACDS urges CMS to assure that upcoming modifications to HIPAA transaction billing standards assure 

that retail pharmacies and other components in the prescription drug distribution 

and billing system (i.e. PBMs, insurers, health plans, etc.) are able to adjudicate 

claims for prescribed supplies in the NCPDP 5.1 real time transaction standard and, 

not exclusively using a batch standard. 

Both the discount card program and the Part D coverage program must provide 

a prescription drug benefit (which may include some covered supplies, such as insulin syringes) in a real time manner. Using batch standards to process any part of 

these claims will cause delay for the beneficiary in receiving their supplies and significant administrative complexities for the pharmacy provider in filling prescriptions for a beneficiary. 

Medicaid 

Medicaid Reimbursement: State Medicaid programs continue to face unprecedented challenges in balancing their budgets. However, many states are proposing 

draconian reductions in pharmacy reimbursement that we believe will severely jeopardize Medicaid recipient access to pharmacy services. Many of these reductions are 

being implemented without any justification or evidence that the rates are fair or 

adequate to maintain access to pharmacy services. For example: 

• The state of California is proposing an arbitrary reduction of 10 percent off a 

Medi-Cal provider’s total reimbursement rate. 

• The state of New Mexico is proposing a significant decrease in a pharmacy’s 

Medicaid dispensing fee from $3.65 to $1.50 for brand name prescriptions, and 

then a 3.5 percent reduction off the total reimbursement; 

• The state of Alabama is proposing to decrease pharmacy reimbursement for dispensed drug products from AWP minus 10 percent to WAC plus 4 percent; 

• The state of New Hampshire recently made an arbitrary determination that it 

would pay pharmacies AWP minus 16 percent plus $1.75 for each prescription. 

These reductions are draconian and should not be approved by CMS. It costs 

pharmacies almost $8.00 to dispense the average prescription, but the cost of dispensing Medicaid prescriptions are higher. CMS must provide a ‘‘safety wall’’ for 

Medicaid recipients against these draconian cuts, which are arbitrary and being 

adopted simply for budgetary reasons. 

In each case, the state has failed to both demonstrate why these reductions are 

justified, as well as perform the requisite analysis to show that access to pharmacy 

services is not jeopardized. We urge that these reductions be rejected by CMS. 

States can use other cost savings features that will get to the root of the case of 

71 

3Letter to Congress, American Hospital Association and the American Association of Colleges 

of Pharmacy, 6/5/02. 4 ‘‘Supply of Selected Health Workers,’’ GAO–02–137R, 10/10/01. 

Medicaid prescription drug escalation, and produce more long-term reductions in 

Medicaid spending. 

Uncollected Medicaid Prescription Co-payments (42 USC 1396(e) and 42 

CFR 447.57(a)): In order to achieve cost-savings and control prescription drug utilization, many state Medicaid agencies are imposing and requiring pharmacies to collect co-payments on prescriptions dispensed to Medicaid recipients. Co-payments are 

in addition to any reimbursement a provider receives. By law, these prescription copayments can range between 50 cents and $3 per prescription. A pharmacy cannot 

deny prescription drugs to Medicaid recipients if they are unable to pay the co-payment. 

Moreover, federal regulation prohibits states from increasing payments to any 

provider to offset uncollected or uncollectible payments. This means that a pharmacy is required to absorb the uncollected co-payment. In some states, as many as 

half of all Medicaid prescription drug co-payments go unpaid. These uncollected copayments essentially reduce pharmacy reimbursement to a level that may be well 

below the cost of providing the prescription to the patient. If patients are not obligated to pay the co-pay, there are serious questions about whether drug co-payments are effective in impacting drug utilization patterns. 

If recipients don’t have to pay co-pays, the co-payments serve only as a reduction 

of pharmacy reimbursement since Federal regulations prohibit states from compensating pharmacies for unpaid co-payments. NACDS asks that language be included 

in the FY 2005 Labor/HHS Appropriations bill that would repeal the Federal regulation that prohibits states from compensating Medicaid providers for uncollected cost 

sharing amounts. 

Food and Drug Administration 

Availability of Generic Drugs: NACDS supports increased funding for the FDA 

Office of Generic Drugs to speed approval of generic drugs to market, over and 

above that which has been proposed in the FY 2005 Budget submission. Many popular brand name medications will be losing patent protection, and it is important, 

consistent with the law, to make sure that these generic drugs are marketed as 

quickly as possible so that public and private payors, as well as cash-paying prescription consumers, can earn the benefits. 

Assuring an Adequate Pharmacy Workforce 

NACDS supports enactment of legislation that would establish permanent programs in the Public Health Service Act that would create specific grant and loan 

programs to encourage students to enroll in pharmacy schools, as well as encourage 

pharmacists to teach at schools and colleges of pharmacy. A chronic, nationwide 

shortage of pharmacists is hampering the ability of hospitals, nursing homes, and 

community pharmacies to provide important pharmaceutical care services. Numerous government and industry-sponsored studies have documented the pharmacist 

shortage, including a Congressionally-mandated report by the U.S. Health Resources and Services Administration (HRSA). 

On November 25, 2003 The Pharmacy Education Act of 2003 (S. 648), introduced by Senators Reed (D–RI) and Enzi (R–WY), passed the Senate. On November 

21, 2003 Representatives Cubin (R–WY), John (D–LA), McGovern (D–MA), Pickering (R–MS), Rogers (R–MI), and Simpson (R–ID) introduced a companion bill in 

the house (HR 3591). Each bill authorizes funding for a program of educational loan 

repayments for pharmacy students and prospective pharmacy school faculty. 

• NACDS conducted a survey of its members, which indicated that community 

pharmacies have almost 4,663 vacant pharmacist positions as of July 2003. 

• Forty-six percent of the nation’s hospitals are experiencing a shortage of pharmacists with an average pharmacist vacancy rate of 12.5%.3

• According to the General Accounting Office, ‘‘there is evidence of increasing demand for pharmacy services, which . . . is outpacing growth in supply.’’ 4

• A report by HRSA indicates that the pharmacist shortage is ‘‘a dynamic shortage’’ and concludes that ‘‘the factors causing the current shortage are of a naVerDate May 04 2004 07:17 May 06, 2004 Jkt 093228 PO 00000 Frm 00075 Fmt 6633 Sfmt 6621 E:\HR\OC\A228A.XXX A228A
72 

5 ‘‘The Pharmacist Workforce: A Study of the Supply and Demand for Pharmacists,’’ Health 

Resources and Services Administration, Bureau of Health Professions, 12/00. 

ture not likely to abate in the near future without fundamental changes in 

pharmacy practice and education.’’ 5

Now is the time for Congress to commit to assuring a long-term sustainable pharmacy workforce pool that will assure that medications are used appropriately and 

effectively in all populations, especially Medicare beneficiaries. 

We very much appreciate the opportunity to provide our views on these important 

programs, and look forward to working with the Congress and the Administration 

on assuring that these programs remain sustainable and viable as we move forward. 

f 

Statement of Stephen A. Silverstein, and Mark C. Baff, Sandata 

Technologies, Inc., Port Washington, New York 

Chairman Thomas, Ranking Member Rangel and distinguished Committee members: 

We appreciate the opportunity to offer this statement on behalf of Sandata Technologies, Inc., a leading provider of advanced information technology solutions and 

services, in connection with the Committee’s consideration of the Administration’s 

proposed Fiscal Year (FY) 2005 Budget for the Department of Health and Human 

Services. 

As you know, government-funded health care programs are under great pressure 

to deliver quality health care to eligible individuals while controlling overall expenditures. Recent estimates of the federal budget deficit, which is projected to exceed 

$520 billion in FY 2004, underscore the importance of these efforts. In response, policy-makers are rethinking ways to deliver quality services in a cost-efficient manner 

and to prevent the loss of limited health care dollars due to waste, fraud and abuse. 

Improvements in health care information technology can play a critical role in accomplishing those objectives. Recognizing their potential, the Administration’s proposed FY 2005 Budget targets additional federal funding to expand development 

and utilization of such technologies. 

Specifically, it proposes $50 million in new funding ‘‘to support State or regional 

demonstration grants to test the feasibility of information exchange among health 

care settings and to fund other innovative information technology projects that improve health care quality.’’ The Budget also proposes $50 million to fund grants 

through the Agency for Healthcare Research and Quality (AHRQ) ‘‘to continue efforts to promote, accelerate, and demonstrate the development and adoption of information technology, including in small and rural communities where health information technology penetration has been low.’’ 

In addition to financial resources, however, it is critical for the federal government to work in partnership with the private sector to identify and eliminate regulatory barriers that currently prevent the broader deployment of information technology. For example, many State Medicaid programs require handwritten signatures 

on paper documentation instead of accepting the electronic record and electronic signature. By contrast, Medicare accepts electronic records on a nationwide basis. 

This example is particularly relevant, because health care is increasingly delivered in home- and community-based settings. Further, the Administration’s FY 2005 

Budget includes several proposals to expand home- and community-based care options for individuals with disabilities, including the Medicaid-financed ‘‘New Freedom Initiative’’ and ‘‘Money Follows the Individual’’ demonstrations. 

To meet the growing needs of patients in these care settings, providers can rely 

on cost-efficient, proven information technology known as ‘‘telephony for home care.’’ 

This technology allows providers to deploy a capable management infrastructure to 

reduce administrative costs and prevent waste or fraud, while ensuring that necessary services are delivered to achieve positive health outcomes for patients. 

Telephony for home care ensures that patients receive the quality of care defined 

in their individual plan of care for the appropriate cost. It delivers important benefits to both payors and providers by reducing costs without cutting benefits to patients. For example, the City of New York’s Medicaid-funded home care program is 

estimated to save 5.5 percent of expenditures from the difference between authorized 

hours and actual hours of service provided. 

This service is available wherever telephone service is available, even under crisis 

conditions. During the 2003 blackout in the Northeastern United States, for example, the service continued to collect data to confirm that patients were being served. 

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Given the distance involved in providing home- and community-based services to patient in rural areas, telephony is particularly effective as a management tool in 

those settings. 

In addition, telephony can play an important role in addressing concerns identified by the General Accounting Office (GAO) in its June 2003 report regarding deficiencies in government oversight under Medicaid home- and community-based waivers. GAO noted that ‘‘[n]o nationwide data are available on states’ quality assurance 

approaches or the status of quality of care for beneficiaries served by waivers for 

the elderly, but concerns have been identified about the quality of care provided 

under many of these waivers.’’ With its accurate, real-time data collection capability, 

telephony can increase management visibility into field operations, track tasks accomplished and match them against the patient’s plan of care, and provide a comprehensive, permanent audit record. 

In the near term, federal health care programs will continue to face significant 

budgetary pressures. It is therefore essential to ensure that limited federal resources are targeted in the most cost-effective manner possible. Telephony for home 

care is a proven, reliable tool to advance that objective by reducing expenditures for 

government payors and providers without cutting benefits to patients. 

Like many advancements in technology, however, broader utilization of telephony 

for home care has been impeded by outdated regulations. These include State Medicaid rules barring use of electronic records, as previously noted. Federal policies 

should remove these barriers by directing States to allow Medicaid-contracting providers to use telephony and other technologies to create and maintain electronic 

data records in lieu of paper records. The federal government should also provide 

grant funding to assist States in updating their health information technology systems. 

We look forward to working in partnership with the Committee to accomplish the 

Administration’s stated goal of working successfully ‘‘to advance the effort to translate information technology opportunities into higher quality, safer and more efficient health care for all Americans.’’ 

Thank you for your consideration of our views. 

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